Bone morphogenetic protein (BMP) pathways control an array of developmental and homeostatic events, and must themselves be exquisitely controlled. Here, we identify Caenorhabditis elegans SMA-10 as a positive extracellular regulator of BMP-like receptor signaling. SMA-10 acts genetically in a BMP-like (Sma/Mab) pathway between the ligand DBL-1 and its receptors SMA-6 and DAF-4. We cloned sma-10 and show that it has fifteen leucine-rich repeats and three immunoglobulin-like domains, hallmarks of an LRIG subfamily of transmembrane proteins. SMA-10 is required in the hypodermis, where the core Sma/Mab signaling components function. We demonstrate functional conservation of LRIGs by rescuing sma-10(lf) animals with the Drosophila ortholog lambik, showing that SMA-10 physically binds the DBL-1 receptors SMA-6 and DAF-4 and enhances signaling in vitro. This interaction is evolutionarily conserved, evidenced by LRIG1 binding to vertebrate receptors. We propose a new role for LRIG family members: the positive regulation of BMP signaling by binding both Type I and Type II receptors.