Smad proteins form multimeric complexes consisting of the ‘common partner’ Smad4 and receptor regulated R-Smads on clustered DNA binding sites. Deciphering how pathway specific Smad complexes multimerize on DNA to regulate gene expression is critical for a better understanding of the cis-regulatory logic of TGF-β and BMP signaling. To this end, we solved the crystal structure of the dimeric Smad4 MH1 domain bound to a palindromic Smad binding element. Surprisingly, the Smad4 MH1 forms a constitutive dimer on the SBE DNA without exhibiting any direct protein–protein interactions suggesting a DNA mediated indirect readout mechanism. However, the R-Smads Smad1, Smad2 and Smad3 homodimerize with substantially decreased efficiency despite pronounced structural similarities to Smad4. Therefore, intricate variations in the DNA structure induced by different Smads and/or variant energetic profiles likely contribute to their propensity to dimerize on DNA. Indeed, competitive binding assays revealed that the Smad4/R-Smad heterodimers predominate under equilibrium conditions while R-Smad homodimers are least favored. Together, we present the structural basis for DNA recognition by Smad4 and demonstrate that Smad4 constitutively homo- and heterodimerizes on DNA in contrast to its R-Smad partner proteins by a mechanism independent of direct protein contacts.