Smad proteins have been identified as mediators of intracellular signal transduction by members of the transforming growth factor-β (TGF-β) superfamily, which affect cell proliferation, differentiation, as well as pattern formation during early vertebrate development. Following receptor activation, Smads are assembled into heteromeric complexes consisting of a pathway-restricted Smad and the common Smad4 that are subsequently translocated into the nucleus where they are thought to play an important role in gene transcription. Here we report the identification of Smad Binding Elements (SBEs) composed of the sequence CAGACA in the promoter of theJunB gene, an immediate early gene that is potently induced by TGF-β, activin, and bone morphogenetic protein (BMP) 2. TwoJunB SBEs are arranged as an inverted repeat that is transactivated in response to Smad3 and Smad4 co-overexpression and shows inducible binding of a Smad3- and Smad4-containing complex in nuclear extracts from TGF-β-treated cells. Bacterial-expressed Smad proteins bind directly to the SBE. Multimerization of the SBE creates a powerful TGF-β-inducible enhancer that is also responsive to activin and BMPs. The identification of the sequence CAGACA as a direct binding site for Smad proteins will facilitate the identification of regulatory elements in genes that are activated by members of the TGF-β superfamily.