Components of the signaling pathways that lie downstream of Ser/Thr kinase receptors and are required for signaling by the TGF beta superfamily have been poorly defined. The Drosophila gene Mothers against dpp (MAD) and the C. elegans sma genes are implicated in these signaling pathways. We show that MAD functions downstream of DPP receptors and is required for receptor signaling. Phosphorylation of MADR1, a human homolog of MAD, is tightly regulated and rapidly induced by BMP2, but not TGF beta or activin. This phosphorylation is necessary for function, since a point mutant that yields a null phenotype in Drosophila is not phosphorylated. BMP2 treatment results in accumulation of MADR1 in the nucleus. MAD proteins may thus define a novel class of signaling molecules with nuclear function in Ser/Thr kinase receptor signaling pathways.