Author Summary Nodal and Activin are extracellular signaling molecules that diffuse from the source of secretion and induce recipient stem cells to become new cell types according to a concentration gradient. In the early embryo, they are important for the specification of tissues at the correct place and time, but paradoxically they drive the opposite function in embryonic and epiblast stem cells where they maintain the stem cell state instead of promoting differentiation. The molecular basis of how the level of signaling determines stem cell fate decisions remains poorly understood. We found that Smad2, the main transcription factor of the Nodal/Activin pathway was phosphorylated according to the level of signaling. By mapping where phospho-Smad2 binds in the embryonic stem cell genome and how this affects transcription of the associated target genes, we show that phospho-Smad2 can recruit and regulate different sets of target gene depending on the signaling level. Moreover, phospho- Smad2 also directly regulates Oct4, a master gene controlling the stem cell state thereby reconciling the opposing functions of the Nodal/Activin pathway in differentiation versus self-renewal programs. The pathway can mediate the exit from self-renewal via Oct4 and simultaneously drives differentiation towards particular lineages by recruiting the relevant gene subsets for this purpose. signaling predominantly promotes differentiation events, the pathway also paradoxically has important roles in the mainte- nance of self-renewal and pluripotency. Indeed Activin A is frequently used directly in culture for the continued propagation and expansion of human embryonic and mouse epiblast stem cells [12–15]. The signaling level of the Nodal/Activin pathway is determined by the overall activity of its components many of which have been identified. Both the Nodal and Activin ligands bind to the same type I/II serine-threonine receptor kinase complexes consisting of ActRIIA/B and Alk4/5/7 respectively in the mouse [16]. Nodal requires the cofactors Cripto/Criptic for receptor activation as opposed to Activin that can bind directly to the receptors and is inhibited by Cripto [17–19]. Upon ligand docking, the Type I receptors phosphorylate the downstream signal transducers Smad2 and Smad3 (Smad2/3) which form hetero- or homodimers and trimers [20]. Both Smad2/3 are also phosphorylated by crosstalk with EGF/ERK/MAPK signaling [21–23] but only the serine residues of the SSXS motif on the extreme carboxy terminus are specifically phosphorylated by Nodal/Activin/ TGFbeta signaling. This phosphorylation is important for the translocation of Smad2/3 to the nucleus in association with Smad4 [24,25] where the complex recruits a number of transcription factors including FoxHI, p53, b-catenin and Jun/ Fos for the direct regulation of target genes [20]. Specificity of the Smads for their direct target genes is partly conferred by a DNA domain in the MH1 region to the Smad-binding DNA element (SBE) consisting of a basic CAGA sequence or its complement [26]. The other partner transcription factors within the complex are required for additional target gene affinity and specificity. While Smad2/3 share more than 90% protein homology, they are not functionally equivalent. Full-length Smad2 differs from Smad3 as the presence of an inhibitory domain in the MH1 region prevents direct DNA binding while Smad3 can bind directly to SBE boxes [27]. However, an alternatively spliced variant of Smad2 that lacks the inhibitory domain can bind DNA directly Nodal/Activin Signaling in ES Cell Fate Decisions and has been shown to be the isoform that accounts for all developmental Smad2 functions in vivo [28]. The developmental roles of Smad2/3 are also disparate. Smad2 knockout mouse embryos fail to form mesoderm and endoderm due to defects in primitive streak specification after implantation at 6.5 dpc [29] closely phenocopying Nodal mutants [10]. In contrast, Smad3 mutant mice are born alive and are fertile but develop chronic intestinal inflammation leading to colorectal cancer [30]. This suggests that Smad2 is the primary transcriptional mediator of early developmental events while Smad3 is involved in immune function and possibly acts as a tumor suppressor postnatally. Our focus here is to clarify how mechanistically different levels of Nodal/Activin signaling lead to different embryonic stem (ES) cell fate decisions. ES cells were differentiated using three different quanta levels of Nodal/Activin signaling. We showed that ES cells are able to arbitrate between three distinct cell fate decisions. Maintenance of endogenous Nodal/Activin signaling is required for self-renewal of ES cells where any perturbation leads to an exit from self-renewal and pluripotency programs towards mesendo- derm induction at high signaling and trophectoderm differentia- tion at low signaling. One obvious question to resolve is whether different levels of Nodal/Activin signaling recruit different sets of genes. While genome wide transcriptome studies have suggested possible Nodal/Activin targets, the identity of many transcriptional targets directly regulated by Smad2/3 remains unknown. One ChIP-chip study to date has been performed to address endogenous Smad2/3 binding in transformed human keratinocytes [31] while none have been carried out in the context of stem cell fate decisions, graded Nodal/Activin signaling or examining beyond promoter regions. Here we performed quantitative chromatin immunoprecipitation (ChIP) of phospho-Smad2 (pSmad2) during graded Nodal/Activin signaling followed by massively parallel sequencing (ChIP-Seq) covering the full extent of pSmad2 binding to the ES cell genome including 59/39 UTRs, exons/introns and gene deserts. PSmad2 binding and regulation of direct target gene expression does not vary uniformly across the genome but changes in both a qualitative and quantitative manner with different signaling levels. Some targets are up- or downregulated proportionate to the activity of the Nodal/Activin pathway. However, separate subsets of target genes are regulated only during high or low signaling conditions. The downstream consequences of this is differential expression of the target genes that combine dose-dependent genes with different subsets of genes activated or repressed specifically for each signaling level. Thus ES cells carry out alternative cell fate decisions via the recruitment of target gene subsets in a pSmad2 dose-dependent manner. To reconcile some of the conflicting functions of Nodal/Activin signaling in self-renewal and pluripotency versus differentiation cell fate decisions, we examined the regulation of the Oct4 pluripotency and self-renewal master gene. Oct4 was directly regulated by pSmad2 binding in the promoter region independent of all other cis regulatory elements. Consistent with the modulation of pSmad2 binding, both endogenous mRNA and protein levels of Oct4 were also repressed by inhibition of Nodal/ Activin signaling. Hence pSmad2 is a direct upstream regulator of Oct4 transcription where it permits an exit from maintenance of the stem cell state towards mesendoderm or trophectoderm differentiation programs as specified by the signaling level. In conclusion, the molecular switching of binding locations and target genes by pSmad2 across the ES cell genome in a dose- dependent manner provides a mechanism for the shift in the balance between maintenance of the stem cell state and the opposing induction of differentiation. Key signaling pathways have PLoS Genetics | www.plosgenetics.org 2 June 2011 | Volume 7 | Issue 6 | e1002130