Members of the TGFbeta superfamily of signalling molecules play important roles in mesendoderm induction and dorsoventral patterning of the vertebrate embryo. We cloned three intracellular mediators of TGFbeta signalling, smad1, 2 and 5, from the zebrafish. The three smad genes are expressed ubiquitously at the onset of gastrulation. The pattern of expression becomes progressively restricted during somitogenesis suggesting that at later stages not only the distribution of the TGFbeta signal but also that of the intracellular smad signal transducer determine the regionally restricted effects of TGFbeta signalling. Forced expression of smad1 leads to an expansion of blood cells resembling the phenotype of moderately ventralized zebrafish mutants. In contrast to Smad1, neither Smad2 nor Smad5 caused a detectable effect when expressed as full-length molecules suggesting that these latter two Smads are more dependent on activation by the cognate TGFbeta ligands. N-terminal truncated Smad2 dorsalized embryos, in agreement with a role downstream of dorsalizing TGFbeta members such as Nodals. In contrast to the C-terminal MH2 domain of Smad2, the C-terminal region of Smad1 and Smad5 lead to pleiotropic effects in embryos giving rize to both dorsalized and ventralized characteristics in injected embryos. Analysis of truncated zebrafish Smad1 in Xenopus embryos supports the notion that the C-terminal domain of smad1 is both a hypomorph and antimorph which can act as activator or inhibitor depending on the region of expression in the embryo. These results indicate a specific function of the MH1 domain of Smad1 and 5 for activity of the molecules.