MAD-related (MADR) proteins are essential intracellular components of TGFbeta signaling pathways and are regulated by phosphorylation. Here, we demonstrate that MADR2 and not the related protein DPC4 transiently interacts with the TGFbeta receptor and is directly phosphorylated by the complex on C-terminal serines. Interaction of MADR2 with receptors and phosphorylation requires activation of receptor I by receptor II and is mediated by the receptor I kinase. Mutation of the phosphorylation sites generates a dominant negative MADR2 that blocks TGFbeta-dependent transcriptional responses, stably associates with receptors, and fails to accumulate in the nucleus in response to TGFbeta signaling. Thus, transient association and phosphorylation of MADR2 by the TGFbeta receptor is necessary for nuclear accumulation and initiation of signaling.