Using a proteomic approach to screen for new growth factors released by melanoma cells, we identified follistatin as a major heparin-binding factor in medium conditioned by the Bowes melanoma cell line. Since follistatin is primarily studied in relation to its neutralization of activin, a member of the transforming growth factor-beta family of ligands, the expression and function of this receptor system was investigated in a panel of melanoma cell lines and melanocytes. All cell lines expressed activin receptors and showed phosphorylation of Smad signal transduction molecules upon treatment with activin. Secretion of follistatin, either native or after retroviral transduction, efficiently prevented Smad activation or activation of an activin-responsive luciferase reporter construct. In melanocytes, activin treatment led to growth inhibition and induction of apoptosis. These effects were counteracted by cotreatment with follistatin. In summary, we characterized the activin-activin receptor system in melanocytes and melanoma cell lines and found that secretion of follistatin by melanoma cells may represent an effective way to circumvent activin's negative regulatory effects.