Growth factors of the TGF-beta family signal through type I/II receptor complexes that phosphorylate SMAD transcription factors. In this study, we analyzed signaling of all seven TGF-beta members to identify those that mediate growth through the Drosophila type I receptor BABO. We find that two potential ligands of BABO, Myoglianin (MYO) and Maverick (MAV), do not activate dSMAD2. Only Drosophila Activin (dACT) and the Activin-like ligand Dawdle (DAW) signal through BABO in combination with the type II receptor PUNT and activate dSMAD2. Surprisingly, we find that activation of BABO can also lead to the phosphorylation of the "BMP-specific" MAD. In wing discs, expression of an activated form of dSMAD2 promotes growth similar to dACT and activated BABO. By itself, activated dSMAD2 does not affect DPP/GBB target genes. However, coexpression of activated forms of dSMAD2 and MAD additively induces the expression of spalt. In contrast to dACT, we find that DAW does not promote growth when expressed in wings. In fact, coexpression of DAW with MAD or dSMAD2 decreases growth. daw mutants die primarily during larval stages and exhibit anal pad phenotypes reminiscent of babo mutants. The rescue of daw mutants by restricted expression in neuroendocrine cells indicates that Activin-type ligands are likely distributed through the endocrine system. The distinct signaling of dACT, DAW and MYO through BABO suggests the existence of co-receptors that modulate the canonical SMAD pathway.