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Accumulated evidence has suggested that BMP pathways play critical roles during mammalian cardiogenesis and impairment of BMP signaling may contribute to human congenital heart diseases (CHDs), which are the leading cause of infant morbidity and mortality. Alk3 encodes a BMP specific type I receptor expressed in mouse embryonic hearts. To reveal functions of Alk3 during atrioventricular (AV) cushion morphogenesis and to overcome the early lethality of Alk3(-/-) embryos, we applied a Cre/loxp approach to specifically inactivate Alk3 in the endothelium/endocardium. Our studies showed that endocardial depletion of Alk3 severely impairs epithelium-mesenchymal-transformation (EMT) in the atrioventricular canal (AVC) region; the number of mesenchymal cells formed in Tie1-Cre;Alk3(loxp/loxp) embryos was reduced to only approximately 20% of the normal level from both in vivo section studies and in vitro explant assays. We showed, for the first time, that in addition to its functions on mesenchyme formation, Alk3 is also required for the normal growth/survival of AV cushion mesenchymal cells. Functions of Alk3 are accomplished through regulating expression/activation/subcellular localization of multiple downstream genes including Smads and cell-cycle regulators. Taken together, our study supports the notion that Alk3-mediated BMP signaling in AV endocardial/mesenchymal cells plays a central role during cushion morphogenesis.