Decapentaplegic (Dpp) is one of at least five TGF-beta superfamily ligands identified in the Drosophila genome. Dpp, a functional orthologue of mammalian BMP-2 and BMP-4, is a morphogen and plays an essential role in Drosophila development. Dpp regulates embryonic dorsal-ventral polarity and is required for gut morphogenesis and outgrowth and patterning of imaginal disks. Cellular responses to Dpp are mediated by the ligand-induced formation of heteromeric complexes of the Drosophila type I, Thick Veins (Tkv), and type II, Punt, serine/threonine kinases. The activated receptor complex induces the phosphorylation of the prototypical Smad, Mad, and subsequent translocation of the Mad-Medea complex to the nucleus where they regulate the transcription of target genes. Secreted extracellular Dpp antagonists, including the short-gastrulation (Sog) and twisted gastrulation (TSG), bind to Dpp and regulate its availability.