The tumor suppressor gene Smad4 has been proposed to be a common mediator of transforming growth factor beta (TGFbeta)-related signaling pathways. We investigated the role of Smad4 in TGFbeta-related pathways by targeted disruption of its locus in murine cell lines. TGFbeta responses, including growth arrest, induction of the endogenous PAI-1 gene, and other extracellular matrix components, were normal in Smad4-deficient fibroblasts. Assembly of a TGFbeta-induced DNA-binding complex on one of two regulatory regions in the human plasminogen activator inhibitor (PAI)-1 promoter did not require Smad4 but was, instead, dependent on a TFE-3 binding site. In contrast, Smad4 was required for activation of the Xenopus Mix.2 promoter in response to TGFbeta/activin. Smad4 was also involved in the regulation of the Msx homeobox protein family members in response to bone morphogenetic protein (BMP). Interestingly, the expression of the endogenous Msx-2 was reduced, whereas that of Msx-3 was activated in differentiating Smad4(-/-) ES cells relative to wild-type cells. Moreover, reporter assays of the Msx-2 promoter revealed an absolute requirement for Smad4 in fibroblasts and ES cells for activation. Our results indicate that Smad4 is dispensable for critical TGFbeta-induced responses but is required for others in murine fibroblasts. We have identified transcriptional targets for Smad4 in the BMP signaling pathway, which may contribute to the genetic defect observed in the Smad4-deficient embryos.