Biological signals for transforming growth factor beta (TGF-beta) are transduced through transmembrane serine/threonine kinase receptors that signal to a family of intracellular mediators known as Smads. Smad2 and Smad4 are important for transcriptional and antiproliferative responses to TGF-beta, and their inactivation in human cancers indicates that they are tumor suppressors. A missense mutation at a conserved arginine residue in the amino-terminal MH1 domain of both Smad2 and Smad4 has been identified in tumors from patients with colorectal and pancreatic cancers, respectively. However, the mechanism whereby this mutation interferes with Smad activity is uncertain. Here we show that these mutations do not disrupt activation of Smads, including receptor-mediated phosphorylation of Smad2, Smad2/Smad4 heteromeric complex formation, and Smad nuclear translocation. In contrast, we demonstrate that the mutant Smads are degraded rapidly in comparison with their wild-type counterparts. We show that this decrease in Smad protein stability occurs through induction of Smad ubiquitination by pathways involving the UbcH5 family of ubiquitin ligases. These studies thus reveal a mechanism for tumorigenesis whereby genetic defects in Smads induce their degradation through the ubiquitin-mediated pathway.