Ubiquitin-mediated proteolysis regulates the activity of diverse receptor systems. Here, we identify Smurf2, a C2-WW-HECT domain ubiquitin ligase and show that Smurf2 associates constitutively with Smad7. Smurf2 is nuclear, but binding to Smad7 induces export and recruitment to the activated TGF beta receptor, where it causes degradation of receptors and Smad7 via proteasomal and lysosomal pathways. IFN gamma, which stimulates expression of Smad7, induces Smad7-Smurf2 complex formation and increases TGF beta receptor turnover, which is stabilized by blocking Smad7 or Smurf2 expression. Furthermore, Smad7 mutants that interfere with recruitment of Smurf2 to the receptors are compromised in their inhibitory activity. These studies thus define Smad7 as an adaptor in an E3 ubiquitin-ligase complex that targets the TGF beta receptor for degradation.