Interleukin-1 (IL-1) and transforming growth factor-beta (TGFβ) are important cytokines involved in corneal wound healing. Here, we studied the effect of these cytokines on corneal stromal cell (keratocyte) differentiation. IL-1β treatment resulted in reduced keratocyte phenotype, as evident by morphological changes and decreased expression of keratocyte markers, including keratocan, lumican, ALDH3A1, and CD34. TGFβ1 treatment induced keratocyte differentiation towards the myofibroblast phenotype. This was inhibited by simultaneous treatment with IL-1β, as seen by inhibition of α-SMA expression, morphological changes, and reduced contractibility. We found that the mechanism of crosstalk between IL-1β and TGFβ1 occurred via regulation of the NF-κB signaling pathway, since the IL-1β induced inhibition of TGFβ1 stimulated keratocyte-myofibroblast differentiation was abolished by a specific NF-κB inhibitor, TPCA-1. We further found that Smad7 participated in the downstream signaling. Smad7 expression level was negatively regulated by IL-1β and positively regulated by TGFβ1. TPCA-1 treatment led to an overall upregulation of Smad7 at mRNA and protein level, suggesting that NF-κB signaling downregulates Smad7 expression levels in keratocytes. All in all, we propose that regulation of cell differentiation from keratocyte to fibroblast, and eventually myofibroblast, is closely related to the opposing effects of IL-1β and TGFβ1, and that the mechanism of this is governed by the crosstalk of NF-κB signaling.