The bone morphogenetic protein (BMP) family is a conserved group of signalling molecules within the transforming growth factor-beta (TGF-beta) superfamily. This group, including the Drosophila decapentaplegic (dpp) protein and the mammalian BMPs, mediates cellular interactions and tissue differentiation during development. Here we show that a homologue of human BMPs controls a developmental switch in the life cycle of the free-living soil nematode Caenorhabditis elegans. Starvation and overcrowding induce C. elegans to form a developmentally arrested, third-stage dauer larva. The daf-4 gene, which acts to inhibit dauer larva formation and promote growth, encodes a receptor protein kinase similar to the daf-1, activin and TGF-beta receptor serine/threonine kinases. When expressed in monkey COS cells, the daf-4 receptor binds human BMP-2 and BMP-4. The daf-4 receptor is the first to be identified for any growth factor in the BMP family.