The mammalian homologue of Drosophila tinman, Nkx2-5, plays an early role in regulating cardiac genes and morphogenesis. Bone morphogenetic proteins (BMPs), members of the transforming growth factor (TGF)-beta family of signaling molecules, are involved in numerous developmental processes. BMP signaling is crucial in the regulation of Nkx2-5 expression and specification of the cardiac lineage. Constitutively active BMP type I receptor or the downstream pathway components and DNA-binding transcription factors, Smad1/4 directly activated Nkx2-5 gene transcription. We identified and characterized a novel upstream Nkx2-5 enhancer, composed of clustered repeats of Smad and GATA DNA binding sites. This composite Nkx2-5 enhancer was a direct target of BMP signaling via cooperative interactions between the downstream transducers Smad1/4 and GATA-4. In mammalian two hybrid assays, Smad factors recruited the hybrid gene GATA4-VP16 to strongly drive transcription of a reporter gene containing multimerized Smad binding sites These cofactors interacted through the second zinc finger and adjacent basic domain of GATA-4 and the N-terminal domain of Smads. Smad4 and GATA4 were also found to bind in vivo with the Nkx2-5 composite enhancer, as revealed by chromatin immunoprecipitation analysis of differentiated P19 cells. Finally, transgenic mice containing the Smad/GATA composite enhancer recapitulated early murine Nkx2-5 cardiac expression and deletion of this enhancer within a 10-kb transgene pBS-Nkx2-5 LacZ significantly reduced expression in the cardiac crescent. Thus, integration of GATA transcription factors with BMP signaling, through co-association with Smads factors, may initiate early Nkx2-5 expression; suggesting a vital role for the combination of these factors in the specification of cardiac progenitors.