TAK1 (transforming growth factor--activated kinase-1), a MAP3K with considerable sequence similarity to Raf-1 and MEKK-1, has been identified as a transforming growth factor-/bone morphogenetic protein (BMP)-activated cytosolic component of the MAPK pathways. In this investigation, the molecular interactions between TAK1 and Smad proteins were characterized as well as their influence on BMP-mediated mesenchymal cell differentiation along the osteogenic/chondrogenic pathway. In co-immunoprecipitations we found an interaction of TAK1 with all Smads tested, R-Smads Smads1-5, the co-Smad Smad4, and the inhibitory Smads (I-Smad6 and I-Smad7). Smad interaction with TAK1 takes place through their MH2 domain. This interaction is dependent on the presence of an active kinase domain in TAK1. TAK1 dramatically interferes with RSmad transactivation in reporter assays and affects subcellular distribution of Smad proteins. Activated TAK1 also interferes with BMP-dependent osteogenic development in murine mesenchymal progenitor cells (C3H10T 1 ⁄2). A potential TAK1-mediated apoptosis process could be excluded for these cells. Both synergistic and interfering influences of TAK1 on BMP-mediated Smad-signaling have been reported previously. We suggest that TAK1 is a factor that is involved in the finetuning of BMP effects during osteogenic development.