Bone morphogenetic protein (BMP) signaling regulates many different biological processes, including cell growth, differentiation, and embryogenesis. BMPs bind to heterogeneous complexes of transmembrane serine/threonine (Ser/Thr) kinase receptors known as the BMP type I and II receptors (BMPRI and BMPRII). BMPRII phosphorylates and activates the BMPRI kinase, which in turn activates the Smad proteins. The cytoplasmic region of BMPRII contains a "tail" domain (BMPRII-TD) with no enzymatic activity or known regulatory function. The discovery of mutations associated with idiopathic pulmonary artery hypertension mapping to BMPRII-TD underscores its importance. Here, we report that Tribbles-like protein 3 (Trb3) is a novel BMPRII-TD-interacting protein. Upon BMP stimulation, Trb3 dissociates from BMPRII-TD and triggers degradation of Smad ubiquitin regulatory factor 1 (Smurf1), which results in the stabilization of BMP receptor-regulated Smads and potentiation of the Smad pathway. Downregulation of Trb3 inhibits BMP-mediated cellular responses, including osteoblast differentiation of C2C12 cells and maintenance of the smooth muscle phenotype of pulmonary artery smooth muscle cells. Thus, Trb3 is a critical component of a novel mechanism for regulation of the BMP pathway by BMPRII.