Unique players in the BMP pathway:: Small C-terminal domain phosphatases dephosphorylate Smad1 to attenuate BMP signaling

Smad transcription factors are key signal transducers for the TGF-beta/bone morphogenetic protein (BMP) family of cytokines and morphogens. C-terminal serine phosphorylation by TGF-beta and BMP membrane receptors drives Smads into the nucleus as transcriptional regulators. Dephosphorylation and recycling of activated Smads is an integral part of this process, which is critical for agonist sensing by the cell. However, the nuclear phosphatases involved have remained unknown. Here we provide functional, biochemical, and embryological evidence identifying the SCP (small C-terminal domain phosphatase) family of nuclear phosphatases as mediators of Smadl dephosphorylation in the BMP signaling pathway in vertebrates. Xenopus SCP2/Os4 inhibits BMP activity in the presumptive ectoderm and leads to neuralization. In Xenopus embryos, SCP2/Os4 and human SCP1, 2, and 3 cause selective dephosphorylation of Smad1 compared with Smad2, inhibiting BMP- and Smad1-dependent transcription and leading to the induction of the secondary dorsal axis. In human cells, RNAi-mediated depletion of SCP1 and SCP2 increases the extent and duration of Smadl phosphorylation in response to BMP, the transcriptional action of Smad1, and the strength of endogenous BMP gene responses. The present identification of the SCP family as Smad C-terminal phosphatases sheds light on the events that attenuate Smad signaling and reveals unexpected links to the essential phosphatases that control RNA polymerase II in eukaryotes.