Bone morphogenetic proteins (BMPs) induce dendritic growth in cultured sympathetic neurons; however, the signaling pathways that mediate this dendrite-promoting activity have not been previously characterized. Here we report studies of the signaling events that regulate the growth of these afferent processes. We find that Smad1 is expressed in sympathetic neurons and that BMPs rapidly induce its phosphorylation and translocation from the cytoplasm to the nucleus. Furthermore, a dominant negative form of Smad1 inhibits BMP-7-induced dendritic growth, suggesting a requirement for Smad1 activation in this biological activity of BMP-7. A physical interaction between Smad1 and components involved in the proteasome-mediated degradation system was detected with a yeast two-hybrid screen, thereby prompting an examination of the effects of proteasome inhibitors on dendritic growth. Lactacystin and ALLN (N-acetyl-Leu-Leu-norleucinal) selectively blocked BMP-7-induced dendritic growth without adversely affecting either cell viability or axonal growth. Moreover, studies of transfected P19 cells suggest that the proteasome inhibitors directly block the effects of Smad1 on the transcriptional activity of the Tlx-2 promoter. These data indicate that BMP-induced dendritic growth requires Smad1 activation and involves proteasome-mediated degradation events. © 2001 John Wiley & Sons, Inc. J Neurobiol 48: 120–130, 2001