Transforming growth factor- (TGF-) family ligands are pleiotropic cytokines. Their physiological activities are not determined by a simple coupling of stimulus and response, but depend critically on context, i.e. the interplay of receptors, ligands, and regulators that form the TGF- signal transduction system of a cell or tissue. How these different components combine to regulate signaling activities remains poorly understood. Here, we describe a ligand-mediated mechanism of signaling regulation. Based on the observation that the type II TGF- family receptors ActRIIA, ActRIIB, and BMPRII interact with a large group of overlapping ligands at overlapping epitopes, we hypothesized high affinity ligands compete with low affinity ligands for receptor binding and signaling. We show activin A and other high affinity ligands directly inhibited signaling by the low affinity ligands BMP-2, BMP-7, and BMP-9. We demonstrate activin A functions as a competitive inhibitor that blocks the ligand binding epitope on type II receptors. We propose binding competition and signaling antagonism are integral functions of the TGF- signal transduction system. These functions could help explain how activin A modulates physiological signaling during extraordinary cellular responses, such as injury and wound healing, and how activin A could elicit disease phenotypes such as cancer-related muscle wasting and fibrosis.Transforming growth factor- (TGF-) family signaling pathways play fundamentally important roles in stem cell fate determination, embryonic development, organogenesis, immunity, and cancer (1-3). The basic principles underlying TGF- family action are well established. A dimeric ligand binds two type I and two type II receptors to form a hexameric complex, thus initiating a signaling cascade that leads to phosphorylation of SMAD transcription factors, their translocation to the nucleus, and expression of target genes (4 -9). Although this simple mechanism completely describes the molecular basis of signaling and response, it fails to explain the complex and sometimes opposite responses elicited by many TGF- family ligands. For example, some TGF- family ligands can both inhibit and promote cell growth, maintain pluripotency, and induce differentiation, and both suppress and activate tumor cells. These paradoxical effects have supported the idea that cellular responses to a TGF- family ligand depend not only on the ligand-induced signaling cascade but also on the cellular context, i.e. the molecular interplay of all the components that form the TGF- signal transduction system of a particular cell type or tissue (10 -14).In humans, the TGF- family consists of 33 ligand genes (TGF-s, activins, bone morphogenetic proteins (BMPs), 2 growth and differentiation factors (GDFs, nodal and lefty), seven type I receptors, (ALK1-7), five type II receptors (ActRIIA, ActRIIB, BMPRII, TGFRII, and AMHRII), as well as a number of co-receptors, regulators, and intracellular SMAD transcription factors (3, 15). A distinct feature of the...