Drosophila Nemo is the founding member of the Nemo-like kinase (Nlk) family of serine/threonine protein kinases that are involved in several Wnt signal transduction pathways. Here we report a novel function for Nemo in the inhibition of bone morphogenetic protein (BMP) signaling. Genetic interaction studies demonstrate that nemo can antagonize BMP signaling and can inhibit the expression of BMP target genes during wing development. Nemo can bind to and phosphorylate the BMP effector Mad. In cell culture, phosphorylation by Nemo blocks the nuclear accumulation of Mad by promoting export of Mad from the nucleus in a kinase-dependent manner. This is the first example of the inhibition of Drosophila BMP signaling by a MAPK and represents a novel mechanism of Smad inhibition through the phosphorylation of a conserved serine residue within the MH1 domain of Mad.