DNA damage and the elicited cellular response underlie the etiology of tumorigenesis and ageing. Yet, how this response integrates inputs from cells' environmental cues remains underexplored. Here we report that the BMP-Smad1 pathway, which is essential for embryonic development and tissue homeostasis, has an important role in the DNA damage response and oncogenesis. On genotoxic stress, Atm phosphorylates BMPs-activated Smad1 in the nucleus on S239, which disrupts Smad1 interaction with protein phosphatase PPM1A, leading to enhanced activation and upregulation of Smad1. Smad1 then interacts with p53 and inhibits Mdm2-mediated p53 ubiquitination and degradation to regulate cell proliferation and survival. Enhanced Smad1 S239 phosphorylation, and Smad1 mutations causing S239 substitution were detected in oesophageal and gastric cancer samples, respectively. These findings suggest that BMP-Smad1 signalling participates in the DNA damage response via the Atm-p53 pathway, thus providing a molecular mechanism whereby BMP-Smad1 loss-of-function leads to tumorigenesis, for example, juvenile polyposis and Cowden syndromes.