Smad4 controls transcriptional progammes in the early embryo. Loss of Smad4 is associated with increased levels of phosphorylated R-Smads and a dramatic shift in gene expression patterns. In wild-type cells TGF-β/BMP/Smad pathways regulate target gene expression via (a) Smad4-dependent or (b) Smad4-independent mechanisms. In the absence of Smad4, phosphorylated R-Smads are efficiently translocated to the nucleus on their own or by interacting with another partner (indicated as an orange box). The pink circles indicate transcriptional partners required for activation or repression of genes. Mis-regulated genes in Smad4 mutant cells potentially reflect the loss of Smad4-dependent pathways or could also be due to increased Smad4-independent signalling. In Smad4 mutant cells, genes in red are mis-regulated resulting in defective endoderm differentiation and massive deposition of BM components (indicated by green mesh). In Drosophila, components of the BM, namely Collagen IV, are known to modulate BMP signalling in the extracellular space during development . Overall the present results demonstrate TGF-β/BMP/Smad signals control expression of the extracellular matrix and reciprocally, BM components fine tune Smad signalling.