The contribution of caveolae in Bone Morphogenetic Protein 2 (BMP2) activated Smad signaling was quantified using a system biology approach. BMP2 plays crucial roles during processes such as hematopoiesis, embryogenesis, and skeletal development. BMP2 signaling is tightly regulated on the plasma membrane by its receptors. The localization of BMP receptors in caveolae and endocytosis through clathrin-coated pits are thought to regulate the signaling; however the conclusions in the current literature are inconsistent. Therefore published literature was used to establish a mathematical model that was validated using confocal AFM (atomic force microscopy), confocal microscopy, and sucrose density centrifugation followed by Western blots, and reporter gene assays. The model and experiments confirmed that both caveolae and CCPs regulate the Smad-dependent signaling pathway, however caveolae are centers at the plasma membrane where receptor–ligand interaction is crucial, Smad phosphorylation occurs, and a high degree of Smad signaling is regulated. This demonstrates a role for caveolae that needs to be considered and further studied. J. Cell. Physiol. © 2012 Wiley Periodicals, Inc.