The transforming growth factor  (TGF-) superfamily, including the bone morphogenetic protein (BMP) and TGF-/activin A subfamilies, is regulated by secreted proteins able to sequester or present ligands to receptors. KCP is a secreted, cysteine-rich (CR) protein with similarity to mouse Chordin and Xenopus laevis Kielin. KCP is an enhancer of BMP signaling in vertebrates and interacts with BMPs and the BMP type I receptor to promote receptor-ligand interactions. Mice homozygous for a KCP null allele are hypersensitive to developing renal interstitial fibrosis, a disease stimulated by TGF- but inhibited by BMP7. In this report, the effects of KCP on TGF-/activin A signaling are examined. In contrast to the enhancing effect on BMPs, KCP inhibits both activin A-and TGF-1-mediated signaling through the Smad2/3 pathway. These inhibitory effects of KCP are mediated in a paracrine manner, suggesting that direct binding of KCP to TGF-1 or activin A can block the interactions with prospective receptors. Consistent with this inhibitory effect, primary renal epithelial cells from KCP mutant cells are hypersensitive to TGF- and exhibit increased apoptosis, dissociation of cadherin-based cell junctions, and expression of smooth muscle actin. Furthermore, KCP null animals show elevated levels of phosphorylated Smad2 after renal injury. The ability to enhance BMP signaling while suppressing TGF- activation indicates a critical role for KCP in modulating the responses between these antiand profibrotic cytokines in the initiation and progression of renal interstitial fibrosis.The transforming growth factor  (TGF-) superfamily encodes growth and differentiation factors that regulate a wide variety of cellular processes. The members of the TGF- superfamily include two major branches, bone morphogenetic proteins (BMPs) and TGF-s/activins (19). TGF- signaling is initiated by the binding of the ligand to a specific pair of type I and type II transmembrane receptors, leading to the phosphorylation of the cytoplasmic serine/threonine kinase domains (19,25). The type I receptors, also known as activinlinked kinases (ALKs), then transduce signals downstream by phosphorylation of receptor-activated Smad proteins. The Smad family can be divided into three distinct subfamilies: receptor-activated Smads (R-Smad), common-partner Smads (Co-Smad), and inhibitory Smads. Whereas Smad1, Smad5, and Smad8 are phosphorylated by BMP type I receptors (ALK-2, ALK-3, and ALK-6), Smad2 and Smad3 are activated by TGF- and activin type I receptors (ALK-5 and ALK-4). The R-Smad and the Co-Smad (Smad4) form a heterooligomer which translocates into the nucleus and regulates expression of ligand-responsive genes. Inhibitory Smads include Smad6 and Smad7, which prevent the activation of R-and Co-Smad.While members of the TGF- superfamily use similar mechanisms to signal to the nucleus, the two major branches achieve specificity by using different elements. Outside the cell, each ligand of the TGF- superfamily binds to specific pairs of the recept...