Phosphorylation of Smads is a crucial regulatory step in the signal transduction pathway initiated by bone morphogenetic proteins (BMPs). Although the dephosphorylation events terminating the pathway in the nucleus have been characterized, little is known about the dephosphorylation of Smads in the cytoplasm. In a proteomic screen for proteins interacting with the BMP type-II receptor, we found the regulatory Bbeta subunit of PP2A. PP2A is one of the major serine/threonine phosphatases involved in cell-cycle regulation and signal transduction. Here, we present data showing that the Bbeta subunit of PP2A interacts with both BMP type-I and type-II receptors. Furthermore, we demonstrate that several B subunits can associate with the BMP type-II receptor, independently of the kinase activity of the receptor and the catalytic subunit of PP2A. By contrast, the PP2A catalytic subunit is required for PP2A function at the receptor complex. This function of PP2A is the dephosphorylation of Smad1, mainly in the linker region. PP2A-mediated dephosphorylation of the BMP-Smad linker region leads to increased nuclear translocation of Smads and overall amplification of the BMP signal. Although other phosphatases identified within the BMP pathway are all shown to inhibit signalling, PP2A is the first example for a signalling stimulatory phosphatase within this pathway.