Transcriptional regulation by transforming growth factor-beta signaling is mediated by the Smad family of transcription factors. It is generally accepted that Smads must interact with other transcription factors to bind to their targets. However, recently it has been shown that a complex of the Drosophila Smad proteins, Mad and Medea, binds with high affinity to silencer elements that repress brinker and bag of marbles in response to Dpp signaling. Here we report that these silencers are bound by a heterotrimer containing two Mad subunits and one Medea subunit. We found that the MH1 domains of all three subunits contributed directly to sequence-specific DNA contact, thus accounting for the exceptionally high stability of the Smad-silencer complex. The Medea MH1 domain binds to a canonical Smad box (GTCT), whereas the Mad MH1 domains bind to a GC-rich sequence resembling Mad binding sites previously identified in Dpp-responsive enhancer elements. The consensus for this sequence, GRCGNC, differs from that of the canonical Smad box, but we found that Mad binding nonetheless required the same beta-hairpin amino acids that mediate base-specific contact with GTCT. Binding was also affected by alanine substitutions in Mad and Med at a subset of basic residues within and flanking helix 2, indicating a contribution to binding of the GRCGNC and GTCT sites. The slight alteration of the Dpp silencers caused them to activate transcription in response to Dpp signaling, indicating that the potential for Smad complexes to recognize specific targets need not be limited to repression.