Smad6 and Smad7 are inhibitory Smads induced by transforming growth factor β-Smad signal transduction pathways in a negative-feedback mechanism. Previously it has been thought that inhibitory Smads bind to the type I receptor and block the phosphorylation of receptor-activated Smads, thereby inhibiting the initiation of Smad signaling. Conversely, few studies have suggested the possible nuclear functions of inhibitory Smads. Here, we present compelling evidence demonstrating that Smad6 repressed bone morphogenetic protein-induced Id1 transcription through recruiting transcriptional corepressor C-terminal binding protein (CtBP). A consensus CtBP-binding motif, PLDLS, was identified in the linker region of Smad6. Our findings show that mutation in the motif abolished the Smad6 binding to CtBP and subsequently its repressor activity of transcription. We conclude that the nuclear functions and physical interaction of Smad6 and CtBP provide a novel mechanism for the transcriptional regulation by inhibitory Smads.