The Transforming Growth Factor (TGF) β signalling family includes morphogens, such as Nodal and Activin, with important functions in vertebrate development. The concentration of the morphogen is critical for fate decisions in the responding cells. Smad2 and Smad3 are effectors of the Nodal/Activin branch of TGFβ signalling: they are activated by receptors, enter the nucleus and directly transcribe target genes. However, there have been no studies correlating levels of Smad2/3 activation with expression patterns of endogenous target genes in a developmental context over time. We used mouse Embryonic Stem (ES) cells to create a system whereby levels of activated Smad2/3 can be manipulated by an inducible constitutively active receptor (Alk4*) and an inhibitor (SB-431542) that blocks specifically Smad2/3 activation. The transcriptional responses were analysed by microarrays at different time points during activation and repression. We identified several genes that follow faithfully and reproducibly the Smad2/3 activation profile. Twenty-seven of these were novel and expressed in the early embryo downstream of Smad2/3 signalling. As they responded to Smad2/3 activation in the absence of protein synthesis, they were considered direct. These immediate responsive genes included negative intracellular feedback factors, like SnoN and I-Smad7, which inhibit the transcriptional activity of Smad2/3. However, their activation did not lead to subsequent repression of target genes over time, suggesting that this type of feedback is inefficient in ES cells or it is counteracted by mechanisms such as ubiquitin-mediated degradation by Arkadia. Here we present an ES cell system along with a database containing the expression profile of thousands of genes downstream of Smad2/3 activation patterns, in the presence or absence of protein synthesis. Furthermore, we identify primary target genes that follow proportionately and with high sensitivity changes in Smad2/3 levels over 15–30 hours. The above system and resource provide tools to study morphogen function in development.