The TGF beta family member Nodal is central to control pluripotent stem cell fate, but its use as a stem cell differentiation factor is limited by low specific activity. During development, Nodal depends on growth and differentiation factor (Gdf)-1 and on the shared co-receptor Cryptic to specify visceral left-right axis asymmetry. We therefore asked whether the functionality of Nodal can be augmented by Gdf1. Because Nodal and Gdf1 coimmunoprecipitate each other, they were predicted to form heterodimers, possibly to facilitate diffusion or to increase the affinity for signaling receptors. Here, we report that Gdf1 suppresses an unexpected dependence of Nodal on serum proteins and that it is critically required for non-autonomous signaling in cells expressing Cryptic. Nodal, Gdf1, and their cleaved propeptides copurified as a heterodimeric low molecular weight complex that stimulated Activin receptor (Acvr) signaling far more potently than Nodal alone. Although heterodimerization with Gdf1 did not increase binding of Nodal to Fc fusions of co-receptors or Acvr extracellular domains, it was essential for soluble Acvr2 to inhibit Nodal signaling. This implies that Gdf1 potentiates Nodal activity by stabilizing a low molecular weight fraction that is susceptible to neutralization by soluble Acvr2. Finally, in differentiating human ES cells, endodermal markers were more efficiently induced by Nodal.Gdf1 than by Nodal, suggesting that Nodal.Gdf1 is an attractive new reagent to direct stem cell differentiation.