Arkadia was originally identified as a protein that enhances signalling activity of Nodal and induces mammalian nodes during early embryogenesis; however, the mechanisms by which Arkadia affects transforming growth factor‐β (TGF‐β) superfamily signalling have not been determined. Here we show that Arkadia is widely expressed in mammalian tissues, and that it enhances both TGF‐β and bone morphogenetic protein (BMP) signalling. Arkadia physically interacts with inhibitory Smad, Smad7, and induces its poly‐ubiquitination and degradation. In contrast to Smurf1, which interacts with TGF‐β receptor complexes through Smad7 and degrades them, Arkadia fails to associate with TGF‐β receptors. In contrast to Smad7, expression of Arkadia is down‐regulated by TGF‐β. Silencing of the Arkadia gene resulted in repression of transcriptional activities induced by TGF‐β and BMP, and accumulation of the Smad7 protein. Arkadia may thus play an important role as an amplifier of TGF‐β superfamily signalling under both physiological and pathological conditions.