Transforming growth factor-beta (TGF-beta) is the founding member of a large superfamily of related growth and differentiation factors that include bone morphogenetic proteins and activins. TGF-beta signals through two related transmembrane ser/thr kinase receptors, the type I and type II receptors. Signalling is initiated when the ligand binds to the type II receptor which is followed by recruitment of the type I receptor into a heteromeric complex. Within the complex the type II receptor transphosphorylates and activates the type I receptor kinase which targets downstream signalling components of the pathway. Proteins related to the Drosophila gene Mothers against dpp (MAD) are critical downstream substrates of the type I kinase. The vertebrate members of the MAD-related family, termed Smad2 and Smad3, interact specifically with the TGF-beta type I receptor and are phosphorylated on the last two serines of a conserved C-terminal SSXS motif. This phosphorylation induces association between these receptor-regulated Smads and Smad4 followed by translocation of the heteromeric complex to the nucleus. In the nucleus, heteromeric complexes of Smads can interact with DNA and with specific DNA binding transcription factors to elicit gene responses to TGF-beta. Thus TGF-beta signalling involves a direct pathway from the cell surface receptors to the nucleus. Recently, a novel mechanism to negatively regulate TGF-beta signalling was described that involves another class of MADR proteins. These anti-MADR proteins potently inhibit TGF-beta signalling by functioning as direct antagonists of the TGF-beta receptor type I kinase domain.