Patients with secondary myelodysplasias and acute myeloid leukemias (MDS/AML) frequently exhibit interstitial deletions of the chromosome-5q resulting in hemizygous loss of the transcription transactivator Smad5. Smad5 is a member of the signal transducer family conveying the pleiotropic TGF-gb/BMP cytokine signals with roles in development, cell growth control, and tumor progression. Here we present a study of the Smad5 expression and its functional role in leukemia cell lines as well as in primary CD34+ progenitors of MDS/AML patients and healthy individuals. Consistent Smad5 gene expression in these cell types and the gradual increase in its mRNA and protein levels in a model of induced erythroid differentiation of murine erythroleukemia (MEL) cells suggest a role of the gene in hematopoiesis. We show that bone morphogenetic protein 4 (BMP4) directs Smad5 activation in human hematopoietic cells, as monitored at the levels of protein phosphorylation, nuclear translocation, and specific transcription response. In vitro induction of normal human CD34+ cells by BMP4 results in significantly increased proliferation of erythroid progenitors (BFU-E) and formation of glycophorin-A+ cells, whereas perturbation of Smad5 expression by antisense oligonucleotides causes significantly decreased rates of BMP4-induced erythroid differentiation. We have not detected any effects of Smad5 inhibition on BMP4-stimulated progenitors of the granulocyteNmacrophage lineage. We propose that the BMP4/Smad5 signal transduction pathway activates hematopoietic differentiation programs that may be impaired in anemia manifestations in MDS and AML patients with Smad5 haploinsufficiency.