Transforming growth factor-beta (TGF-beta) family members signal through a unique set of intracellular proteins called Smads. Smad4, previously identified as the tumor suppressor DPC4, is functionally distinct among the Smad family, and is required for the assembly and transcriptional activation of diverse, Smad-DNA complexes. We previously identified a 48-amino acid proline-rich regulatory element within the middle linker domain of this molecule, the Smad4 activation domain (SAD), which is essential for mediating these signaling activities. We now characterize the functional activity of the SAD. Mutants lacking the SAD are still able to form complexes with other Smad family members and associated transcription factors, but cannot activate transcription in these complexes. Furthermore, the SAD itself is able to activate transcription in heterologous reporter assays, identifying it as a proline-rich transcriptional activation domain, and indicating that the SAD is both necessary and sufficient to activate Smad-dependent transcriptional responses. We show that transcriptional activation by the SAD is p300-dependent, and demonstrate that this activity is associated with a physical interaction of the SAD with the amino terminus of p300. These data identify a novel function of the middle linker region of Smad4, and define the role of the SAD as an important locus determining the transcriptional activation of the Smad complex.