The TGF-beta/activin/BMP superfamily of growth factors signals through heteromeric receptor complexes of type I and type II serine/threonine kinase receptors. The signal originated by TGF-beta-like molecules appears to be transduced by a set of evolutionarily conserved proteins known as SMADs, which upon activation directly translocate to the nucleus where they may activate transcription. Five SMAD proteins have so far been characterized in vertebrates. These factors are related to the mediator of decapentaplegic (dpp) signalling, mothers against dpp (Mad), in Drosophila and to the Sma genes from Caenorhabditis elegans. Smad1 and Smad2 have been shown to mimic the effects of BMP and activin, respectively, both in Xenopus and in mammalian cells, whereas Smad3 (a close homologue of Smad2) and the related protein DPC4, a tumour-suppressor gene product, mediate TGF-beta actions. We report here that DPC4 is essential for the function of Smad1 and Smad2 in pathways that signal mesoderm induction and patterning in Xenopus embryos, as well as antimitogenic and transcriptional responses in breast epithelial cells. DPC4 associates with Smad1 in response to BMP and with Smad2 in response to activin or TGF-beta. DPC4 is therefore a regulated partner of SMADs that function in different signalling pathways of the TGF-beta family.