Bone morphogenetic proteins (BMPs) are secreted polypeptides belonging to the transforming growth factor- (TGF-) superfamily that activates a broad range of biological responses in the metazoan organism. The BMP-initiated signaling pathway is under tight control by processes including regulation of the ligands, the receptors, and the key downstream intracellular effector Smads. A critical point of control in BMP signaling is the phosphorylation of Smad1, Smad5, and Smad8 in their C-terminal SXS motif. Although such phosphorylation, which is mediated by the type I BMP receptor kinases in response to BMP stimulation, is well characterized, biochemical mechanisms underlying Smad dephosphorylation remain to be elucidated. In this study, we have found that PPM1A, a metal ion-dependent protein serine/threonine phosphatase, physically interacts with and dephosphorylates Smad1 both in vitro and in vivo. Functionally, overexpression of PPM1A abolishes BMP-induced transcriptional responses, whereas RNA interference-mediated knockdown of PPM1A enhances BMP signaling. Collectively, our study suggests that PPM1A plays an important role in controlling BMP signaling through catalyzing Smad dephosphorylation.Bone morphogenetic proteins (BMPs), 3 originally identified by their ability to cause bone differentiation (1), are signaling molecules that belong to the transforming growth factor- (TGF-) superfamily. Presently, the biological functions of BMPs have been greatly expanded. BMPs regulate skeletal development as well as many non-osteogenic developmental processes, such as mesoderm patterning, left-right symmetry, neuronal patterning, and hematopoiesis (2-5). Accumulating evidence indicates that BMPs play an important role in the regulation of stem cell properties (3, 6 -8). Signals from BMP ligands are transduced through binding to type I and II receptors on the cell surface, where type II receptors activate type I receptors, which in turn phosphorylate the downstream Smad1, Smad5, and Smad8. The phospho-R-Smads (P-Smads) form a complex with Smad4 and translocate into the nucleus, where they bind to the Smad binding sites and cooperate with other transcription factors to regulate BMP-induced gene expression (5, 9, 10).Despite substantial effort devoted to understanding the actions of BMP/TGF- and Smads, the precise regulation of Smads remains enigmatic. Regulation of Smads can be accomplished via various post-translational mechanisms, including phosphorylation and ubiquitin-dependent modifications (11,12). Among these, BMP-induced phosphorylation of Smad1/ 5/8, which is carried out by the BMP type I receptor (BMPRIA or BMPRIB) and occurs at the C-terminal SXS motif of Smad1/ 5/8, represents the most critical step in Smad signaling. The SXS phosphorylation triggers a cascade of intracellular events from Smad complex assembly in the cytoplasm to transcriptional control in the nucleus.The reversible phosphorylation and dephosphorylation represents a fundamental strategy used by eukaryotic organisms to regulate a battery of...