Members of the transforming growth factor beta (TGF-beta) family regulate fundamental physiological processes, such as cell growth, differentiation and apoptosis, in almost all cell types. As a result, defects in TGF-beta signalling pathways have been linked to uncontrolled cellular proliferation and carcinogenesis. Here, we explored the signal transduction mechanisms downstream of the activin/TGF-beta receptors that result in cell growth arrest and apoptosis. We show that in haematopoietic cells, TGF-beta family members regulate apoptosis through expression of the inositol phosphatase SHIP (Src homology 2 (SH2) domain-containing 5' inositol phosphatase), a central regulator of phospholipid metabolism. We also demonstrated that the Smad pathway is required in the transcriptional regulation of the SHIP gene. Activin/TGF-beta-induced expression of SHIP results in intracellular changes in the pool of phospholipids, as well as in inhibition of both Akt/PKB (protein kinase B) phosphorylation and cell survival. Our results link phospholipid metabolism to activin/TGF-beta-mediated apoptosis and define TGF-beta family members as potent inducers of SHIP expression.