The assembly of the Smad complex is critical for TGFbeta signaling, yet the mechanisms that inactivate or empower nuclear Smad complexes are less understood. By means of siRNA screen we identified FAM (USP9x), a deubiquitinase acting as essential and evolutionarily conserved component in TGFbeta and bone morphogenetic protein signaling. Smad4 is monoubiquitinated in lysine 519 in vivo, a modification that inhibits Smad4 by impeding association with phospho-Smad2. FAM reverts this negative modification, re-empowering Smad4 function. FAM opposes the activity of Ectodermin/Tif1gamma (Ecto), a nuclear factor for which we now clarify a prominent role as Smad4 monoubiquitin ligase. Our study points to Smad4 monoubiquitination and deubiquitination as a way for cells to set their TGFbeta responsiveness: loss of FAM disables Smad4-dependent responses in several model systems, with Ecto being epistatic to FAM. This defines a regulative ubiquitination step controlling Smads that is parallel to those impinging on R-Smad phosphorylation.