TGFbeta signaling plays a central role in regulating a broad range of cellular responses in a variety of organisms. TGFbeta signaling from the cell membrane to the nucleus is mediated by the Smad family of proteins. During the past five years of intense investigation, key events in TGFbeta signaling have been documented at the molecular and cellular level. Recent structural studies have improved our understanding of how specificity is generated in the TGFbeta signaling pathways. Despite this progress, significant questions remain regarding the precise mechanisms of signaling and point to the urgent need for well-controlled biochemical studies. Rather than giving a comprehensive review on Smad-mediated TGFbeta signaling, this review focuses on functional insights provided by recent structural studies and discusses several existing controversies.