In Caenorhabditis elegans, the DBL-1 pathway, a BMP/TGFbeta-related signaling cascade, regulates body size and male tail development. We have cloned a new gene, sma-9, that encodes the C. elegans homolog of Schnurri, a large zinc finger transcription factor that regulates dpp target genes in Drosophila. Genetic interactions, the sma-9 loss-of-function phenotype, and the expression pattern suggest that sma-9 acts as a downstream component and is required in the DBL-1 signaling pathway, and thus provide the first evidence of a conserved role for Schnurri proteins in BMP signaling. Analysis of sma-9 mutant phenotypes demonstrates that SMA-9 activity is temporally and spatially restricted relative to known DBL-1 pathway components. In contrast with Drosophila schnurri, the presence of multiple alternatively spliced sma-9 transcripts suggests protein isoforms with potentially different cell sublocalization and molecular functions. We propose that SMA-9 isoforms function as transcriptional cofactors that confer specific responses to DBL-1 pathway activation.