We previously identified a critical serine/threonine residue within the linker domain of Smad2/3, phosphorylated by the kinase GRK2 which plays a critical role in regulating Smad signaling. To define the mechanism by which GRK2-mediated phosphorylation modifies Smad2/3 behavior at the molecular level, we generated mutant Smads where the GRK2 phosphorylation site was replaced with an aspartic acid (D) to mimic the properties of a phospho-residue or an alanine (A) as a control. Interestingly, overexpression of either the D or A mutant inhibits TGFbeta signaling, but through two distinct mechanisms. The D mutant is properly localized and released from the plasma membrane upon ligand stimulation, but fails to interact with the type I receptor kinase. The A mutant properly interacts with and is phosphorylated by the type I receptor, translocates to the nucleus and homodimerizes with wild-type R-Smads, but it fails to form a heterocomplex with Smad4. As a result, both mutants act as antagonists of endogenous TGFbeta signaling through divergent mechanisms. The D mutant acts by blocking endogenous R-Smads phosphorylation and the A mutant acts by preventing endogenous R-Smad/Smad4 heterocomplexes. Thus, mutation of the GRK2 phosphorylation site within the Smad generates dominant negative Smads that efficiently inhibit TGFbeta responses.