Wing patterning in Drosophila requires a Bmp activity gradient created by two Bmp ligands, Gbb and Dpp, and two Bmp type I receptors, Sax and Tkv. Gbb provides long-range signaling, while Dpp signals preferentially to cells near its source along the anteroposterior (AP) boundary of the wing disc. How each receptor contributes to the signaling activity of each ligand is not well understood. Here, we show that while Tkv mediates signals from both Dpp and Gbb, Sax exhibits a novel function for a Bmp type I receptor: the ability to both promote and antagonize signaling. Given its high affinity for Gbb, this dual function of Sax impacts the function of Gbb in the Bmp activity gradient more profoundly than does Dpp. We propose that this dual function of Sax is dependent on its receptor partner. When complexed with Tkv, Sax facilitates Bmp signaling, but when alone, Sax fails to signal effectively and sequesters Gbb. Overall, our model proposes that the balance between antagonizing and promoting Bmp signaling varies across the wing pouch, modulating the level and effective range, and, thus, shaping the Bmp activity gradient. This previously unknown mechanism for modulating ligand availability and range raises important questions regarding the function of vertebrate Sax orthologs.