Proteolytic cleavage of Chordin as a switch for the dual activities of Twisted gastrulation in BMP signaling

Dorsoventral patterning is regulated by a system of interacting secreted proteins involving BMP, Chordin, Xolloid and Twisted gastrulation (Tsg). We have analyzed the molecular mechanism by which Tsg regulates BMP signaling. Overexpression of Tsg mRNA in Xenopus embryos has ventralizing effects similar to Xolloid, a metalloprotease that cleaves Chordin. In embryos dorsalized by LiCl treatment, microinjection of Xolloid or Tsg mRNA restores the formation of trunk-tail structures, indicating an increase in BMP signaling. Microinjection of Tsg mRNA leads to the degradation of endogenous Chordin fragments generated by Xolloid. The ventralizing activities of Tsg require an endogenous Xolloid-like activity, as they can be blocked by a dominant-negative Xolloid mutant. A BMP-receptor binding assay revealed that Tsg has two distinct and sequential activities on BMP signaling. First, Tsg makes Chordin a better BMP antagonist by forming a ternary complex that prevents binding of BMP to its cognate receptor. Second, after cleavage of Chordin by Xolloid, Tsg competes the residual anti-BMP activity of Chordin fragments and facilitates their degradation. This molecular pathway, in which Xolloid switches the activity of Tsg from a BMP antagonist to a pro-BMP signal once all endogenous full-length Chordin is degraded, may help explain how sharp borders between embryonic territories are generated.