Smad proteins transduce signals from transforming growth factor-beta (TGF-beta) superfamily ligands to regulate the expression of target genes. In order to identify novel partners of Smad proteins in transcriptional regulation, we performed a two-hybrid screen using Smad5, a protein that is activated predominantly by bone morphogenetic protein (BMP) signaling. We identified an interaction between Smad5 and suppressor of variegation 3-9 homolog 2 (Suv39h2), a chromatin modifier enzyme. Suv39h proteins are histone methyltransferases that methylate histone H3 on lysine 9, resulting in transcriptional repression or silencing of target genes. Biochemical studies in mammalian cells demonstrated that Smad5 binds to both known mammalian isoforms of Suv39h proteins, and that Smad proteins activated by the TGF-beta signaling pathway, Smad2 and Smad3, do not bind with significant affinity. Functional studies using the muscle creatine kinase (MCK) promoter, which is suppressed by BMP signaling, demonstrate that Suv39h proteins and Smads cooperate to repress promoter activity. These data suggest a model where association of Smad proteins with Suv39h methyltransferases can repress or silence genes involved in developmental processes, and argues that inefficient gene repression may result in the alteration of the differentiated phenotype. Thus, examination of the Smad-Suv interaction may provide insight into the mechanism of phenotypic determination mediated by BMP signaling.