Balancing signals derived from the TGFβ family is crucial for regulating cell proliferation and differentiation, and in establishing the embryonic axis during development. TGFβ/BMP signaling leads to the activation and nuclear translocation of Smad proteins, which activate transcription of specific target genes by recruiting P/CAF and p300. The two members of the ZEB family of zinc finger factors (ZEB-1/δEF1 and ZEB-2/SIP1) regulate TGFβ/BMP signaling in opposite ways: ZEB-1/δEF1 synergizes with Smad-mediated transcriptional activation, while ZEB-2/SIP1 represses it. Here we report that these antagonistic effects by the ZEB proteins arise from the differential recruitment of transcriptional coactivators (p300 and P/CAF) and corepressors (CtBP) to the Smads. Thus, while ZEB-1/δEF1 binds to p300 and promotes the formation of a p300–Smad transcriptional complex, ZEB-2/SIP1 acts as a repressor by recruiting CtBP. This model of regulation by ZEB proteins also functions in vivo, where they have opposing effects on the regulation of TGFβ family-dependent genes during Xenopus development.