The beta:beta activin homodimer and alpha:beta inhibin heterodimer are mutual antagonists which share a common beta subunit. Recently, it has been shown that, similar to transforming growth factor-beta 1, activin is an inhibitor of hepatocyte DNA synthesis. The activin receptor appears to be an obligatory complex of genetically distinct type I and II transmembrane serine/threonine kinases. Activin type I receptors, SKR1 and SKR2, were first cloned from well differentiated human hepatoma cells (HepG2). This prompted us to investigate the binding of activin and inhibin to receptors from HepG2 cells and the effect of the two ligands on DNA synthesis. Here we show that beta:beta activin binds to the activin type II receptor kinase (ActRII) which induces activin binding to the type I receptor kinase SKR2 to form ActRII.beta:beta.SKR2 complexes in which an activin beta chain occupies each receptor subunit. Inhibin also binds to ActRII through its beta subunit, competes with the binding of activin to ActRII, but fails to form the ActRII.SKR2 complex. No specific binding site for inhibin could be demonstrated in HepG2 cells. Inhibin, which had no activity of its own, antagonized the inhibitory effect of activin on DNA synthesis. The results suggest that inhibin may be a natural antagonist of assembly of the heterodimeric activin receptor complex through a dominant-negative mechanism.