Smads transmit signals from transmembrane ser/thr kinase receptors to the nucleus. We now identify SARA (for S mad a nchor for r eceptor a ctivation), a FYVE domain protein that interacts directly with Smad2 and Smad3. SARA functions to recruit Smad2 to the TGFβ receptor by controlling the subcellular localization of Smad2 and by interacting with the TGFβ receptor complex. Phosphorylation of Smad2 induces dissociation from SARA with concomitant formation of Smad2/Smad4 complexes and nuclear translocation. Furthermore, mutations in SARA that cause mislocalization of Smad2 inhibit TGFβ-dependent transcriptional responses, indicating that the regulation of Smad localization is important for TGFβ signaling. These results thus define SARA as a component of the TGFβ pathway that brings the Smad substrate to the receptor.