The type I TGFβ receptor (TβR-I) is activated by phosphorylation of the GS region, a conserved juxtamembrane segment located just N-terminal to the kinase domain. We have studied the molecular mechanism of receptor activation using a homogeneously tetraphosphorylated form of TβR-I, prepared using protein semisynthesis. Phosphorylation of the GS region dramatically enhances the specificity of TβR-I for the critical C-terminal serines of Smad2. In addition, tetraphosphorylated TβR-I is bound specifically by Smad2 in a phosphorylation-dependent manner and is no longer recognized by the inhibitory protein FKBP12. Thus, phosphorylation activates TβR-I by switching the GS region from a binding site for an inhibitor into a binding surface for substrate. Our observations suggest that phosphoserine/phosphothreonine-dependent localization is a key feature of the TβR-I/Smad activation process.