Fibrosis is a chronic disease characterized by an excessive deposition of scar tissue in the affected organs. A central mediator of this process is transforming growth factor‐β (TGF‐β), which stimulates the production of extracellular matrix proteins such as collagens. MicroRNAs (miRNAs) have been implicated in both fibrosis as well as in TGF‐β signaling, but the extent of their regulation has not been fully defined. A functional screen was conducted using a library of miRNA inhibitors to identify miRNAs that affect TGF‐β‐induced type I collagen expression, a key event in the development of fibrosis. The inhibition of one miRNA in particular, miR‐27b, caused a significant increase in type I collagen expression. We found that miR‐27b directly targets Gremlin 1 by binding to its 3′‐UTR, reducing its mRNA levels. TGF‐β signaling decreased miR‐27b expression and caused a corresponding increase in Gremlin 1 levels, suggesting that TGF‐β regulates Gremlin 1 expression in part by modulating miR‐27b expression. Reducing Gremlin 1 levels by either siRNA‐mediated gene silencing or by using the miR‐27b mimic inhibited the expression of several genes known to be involved in fibrosis, while increasing Gremlin 1 levels by the addition of either recombinant protein or the miR‐27b inhibitor enhanced the expression of these genes. In summary, we have demonstrated that miR‐27b targets Gremlin 1, and that this regulation likely represents an important control point in fibrotic pathways. J. Cell. Biochem. 115: 1539–1548, 2014. © 2014 Wiley Periodicals, Inc.