A family of structurally related proteins homologous to the Drosophila mothers against dpp (MAD) gene product have been implicated in signal transduction by members of the TGF-beta superfamily. One of these MAD related proteins (DPC4) has been cloned as a candidate tumour suppressor in pancreas carcinomas, suggesting a role for DPC4 in growth regulation by TGF-beta related proteins. The involvement of DPC4 in TGF-beta1 induced growth inhibition and transcriptional response is demonstrated here, by the introduction of DPC4 in the TGF-beta and activin insensitive breast tumour cell line MDA-MB-468, from which the DPC4 gene is deleted. Transfection of DPC4 in this cell line restores both growth inhibition and the induction of a TGF-beta sensitive reporter construct (3TPlux) by TGF-beta1. In contrast, a DPC4 splice variant lacking amino acid residues 223-301 and cloned from another TGF-beta and activin resistant breast tumour cell line (MDA-MB-231), does not restore the induction of the 3TPlux reporter by TGF-beta1. We also show that in this latter cell line activin resistance is partly due to the absence of a functional activin type IB receptor. These results indicate that DPC4 is part of the TGF-beta signalling cascade and mediates TGF-beta induced growth inhibition. Together with the deletion of DPC4 from pancreas carcinomas these results suggest a role for DPC4 as a tumour suppressor.