Transforming growth factor-beta (TGF-beta) signaling regulates a wide range of cellular processes. Aberrant TGF-beta signaling has been implicated in various disease states in humans. A key element in this signaling pathway is phosphorylation of R-Smads such as Smad2 at the last two serine residues of the C-terminal sequence CSSXS (residues 463-467 in Smad2) by the TbetaRI receptor kinase. Phosphorylation results in the release of the R-Smad from the membrane-anchored protein SARA, binding to the co-mediator protein Smad4, translocation into the nucleus, and regulation of target gene expression. Expressed protein ligation was used to probe the contribution of the individual phosphate groups to Smad2 oligomerization and phosphorylation by TbetaRI. Phosphorylation at both positions was required to generate a stable homotrimer; however, the driving force for Smad2 self-association is provided by pSer465. Additionally, SARA was found to modulate the self-association of partially phosphorylated Smad2, which suggests an added role for this protein in preventing premature release of a monophosphorylated substrate from the receptor complex. In related studies, prephosphorylation of Smad2 at Ser465 was found to significantly increase the rate of phosphorylation at Ser467, suggesting that there may be specific recognition determinants within the kinase for the monophosphorylated intermediate. This information was exploited to design an improved peptide substrate for TbetaRI, which may prove valuable in the design of inhibitors of the TGF-beta pathway.