Transforming growth factor (TGF)-β family proteins control cell physiology, proliferation, and growth, and direct cell differentiation, thus playing key roles in normal development and disease. The mechanisms of how TGF-β family ligands interact with heteromeric complexes of cell surface receptors to then activate Smad signaling that directs changes in gene expression are often seen as established. Even though TGF-β-induced Smad signaling may be seen as a linear signaling pathway with predictable outcomes, this pathway provides cells with a versatile means to induce different cellular responses. Fundamental questions remain as to how, at the molecular level, TGF-β and TGF-β family proteins activate the receptor complexes and induce a context-dependent diversity of cell responses. Among the areas of progress, we summarize new insights into how cells control TGF-β responsiveness by controlling the TGF-β receptors, and into the key roles and versatility of Smads in directing cell differentiation and cell fate selection.