Members of the transforming growth factor-beta superfamily play critical roles in controlling cell growth and differentiation. Effects of TGF-beta family ligands are mediated by Smad proteins. To understand the mechanism of Smad function, we sought to identify novel interactors of Smads by use of a yeast two-hybrid system. A 396-amino acid nuclear protein termed SNIP1 was cloned and shown to harbor a nuclear localization signal (NLS) and a Forkhead-associated (FHA) domain. The carboxyl terminus of SNIP1 interacts with Smad1 and Smad2 in yeast two-hybrid as well as in mammalian overexpression systems. However, the amino terminus of SNIP1 harbors binding sites for both Smad4 and the coactivator CBP/p300. Interaction between endogenous levels of SNIP1 and Smad4 or CBP/p300 is detected in NMuMg cells as well as in vitro. Overexpression of full-length SNIP1 or its amino terminus is sufficient to inhibit multiple gene responses to TGF-beta and CBP/p300, as well as the formation of a Smad4/p300 complex. Studies in Xenopus laevis further suggest that SNIP1 plays a role in regulating dorsomedial mesoderm formation by the TGF-beta family member nodal. Thus, SNIP1 is a nuclear inhibitor of CBP/p300 and its level of expression in specific cell types has important physiological consequences by setting a threshold for TGF-beta-induced transcriptional activation involving CBP/p300.