Interactions with co-factors provide a means by which HOX proteins exert specificity. To identify candidate protein interactors of HOXA13, we created and screened an E11.5-E12.5, distal limb bud yeast two-hybrid prey library. Among the interactors, we isolated the BMP-signaling effector Smad5, which interacted with the paralogous HOXD13 but not with HOXA11 or HOXA9, revealing unique interaction capabilities of the AbdB-like HOX proteins. Using deletion mutants, we determined that the MH2 domain of Smad5 is necessary for HOXA13 interaction. This is the first report demonstrating an interaction between HOX proteins and the MH2 domain of Smad proteins. HOXA13 and HOXD13 also bind to other BMP and TGF-beta/Activin-regulated Smad proteins including Smad1 and Smad2, but not Smad4. Furthermore, HOXD13 could be co-immunoprecipitated with Smad1 from cells. Expression of HOXA13, HOXD13 or a HOXD13 homeodomain mutant (HOXD13(IQN>AAA)) antagonized TGF-beta-stimulated transcriptional activation of the pAdtrack-3TP-Lux reporter vector in Mv1Lu cells as well as the Smad3/Smad4-activated pTRS6-E1b promoter in Hep3B cells. Finally, using mammalian one-hybrid assay, we show that transcriptional activation by a GAL4/Smad3-C-terminus fusion protein is specifically inhibited by HOXA13. Our results identify a new co-factor for HOX group 13 proteins and suggest that HOX proteins may modulate Smad-mediated transcriptional activity through protein-protein interactions without the requirement for HOX monomeric DNA-binding capability.