Using a genetic complementation approach we have identified disabled-2 (Dab2), a structural homolog of the Dab1 adaptor molecule, as a critical link between the transforming growth factor beta (TGF beta) receptors and the Smad family of proteins, Expression of wildtype Dab2 in a TGF beta -signaling mutant restores TGF beta -mediated Smad2 phosphorylation, Smad translocation to the nucleus and Smad-dependent transcriptional responses. TGF beta stimulation triggers a transient increase in association of Dab2 with Smad2 and Smad3, which is mediated by a direct interaction between the N-terminal phosphotyrosine binding domain of Dab2 and the MH2 domain of Smad2, Dab2 associates with both the type I and type II TGF beta receptors in vive, suggesting that Dab2 is part of a multiprotein signaling complex. Together, these data indicate that Dab2 is an essential component of the TGF beta signaling pathway, aiding in transmission of TGF beta signaling from the TGF beta receptors to the Smad family of transcriptional activators.