Smad proteins are key intracellular signaling effectors for the transforming growth factor-beta superfamily of peptide growth factors. Following receptor-induced activation, Smads move into the nucleus to activate transcription of a select set of target genes. The activity of Smad proteins must be tightly regulated to exert the biological effects of different ligands in a timely manner. Here, we report the identification of Smurf2, a new member of the Hect family of E3 ubiquitin ligases. Smurf2 selectively interacts with receptor-regulated Smads and preferentially targets Smad1 for ubiquitination and proteasome-mediated degradation. At higher expression levels, Smurf2 also decreases the protein levels of Smad2, but not Smad3. In Xenopus embryos, ectopic Smurf2 expression specifically inhibits Smad1 responses and thereby affects embryonic patterning by bone morphogenetic protein signals. These findings suggest that Smurf2 may regulate the competence of a cell to respond to transforming growth factor-beta/bone morphogenetic protein signaling through a distinct degradation pathway that is similar to, yet independent of, Smurf1.