SARA, an early endosomal protein, plays a key role in TGFβ signalling, as it presents SMAD2 and SMAD3 for phosphorylation by the activated TGFβ receptors. Here, we show that ERBIN is a new SARA-interacting protein that can be recruited by SARA to early endosomes. ERBIN was recently shown to bind and segregate phosphorylated SMAD2 and SMAD3 (SMAD2/3) in the cytoplasm, thereby inhibiting SMAD2/3-dependent transcription. SARA binds to ERBIN using a new domain, which we have called the ERBID (ERBIN-binding domain), whereas ERBIN binds to SARA using a domain (amino acids 1208-1265) that also interacts with SMAD2 and SMAD3, which we have called the SSID (SARA- and SMAD-interacting domain). We additionally show that SARA competes with SMAD2/3 for binding to ERBIN. In agreement, overexpression of SARA or the ERBID peptide reverses the inhibitory effect of ERBIN on SMAD2/3-dependent transcription. Taken together, these data suggest that the response of cells to TGFβ and activin A can be influenced by the relative concentrations of SARA, ERBIN and SMAD2/3. © 2011. Published by The Company of Biologists Ltd.