Members of the TGF-beta superfamily of signalling molecules work by activating transmembrane receptors with phosphorylating activity (serine-threonine kinase receptors); these in turn phosphorylate and activate SMADs, a class of signal transducers. Activins are growth factors that act primarily through Smad2, possibly in partnership with Smad4, which forms heteromeric complexes with different ligand-specific SMADs after activation. In frog embryos, Smad2 participates in an activin-responsive factor (ARF), which then binds to a promoter element of the Mix.2 gene. The principal DNA-binding component of ARF is FAST-1, a transcription factor with a novel winged-helix structure. We now report that Smad4 is present in ARF, and that FAST-1, Smad4 and Smad2 co-immunoprecipitate in a ligand-regulated fashion. We have mapped the site of interaction between FAST-1 and Smad2/Smad4 to a novel carboxy-terminal domain of FAST-1, and find that overexpression of this domain specifically inhibits activin signalling. In a yeast two-hybrid assay, the FAST-1 carboxy terminus interacts with Smad2 but not Smad4. Deletion mutants of the FAST-1 carboxy terminus that still participate in ligand-regulated Smad2 binding no longer associated with Smad4 or ARF. These results indicate that Smad4 stabilizes a ligand-stimulated Smad2-FAST-1 complex as an active DNA-binding factor.