During vertebrate embryogenesis, members of the Lefty subclass of Transforming Growth Factor-beta (TGFbeta) proteins act as extracellular antagonists of the signaling pathway for Nodal, a TGFbeta-related ligand essential for mesendoderm formation and left-right patterning. Genetic and biochemical analyses have shown that Nodal signaling is mediated by activin receptors but also requires EGF-CFC coreceptors, such as mammalian Cripto or Cryptic. Misexpression experiments in zebrafish and frogs have suggested that Lefty proteins can act as long-range inhibitors for Nodal, possibly through competition for binding to activin receptors. Here we demonstrate two distinct and unexpected mechanisms by which Lefty proteins can antagonize Nodal activity. In particular, using a novel assay for Lefty activity in mammalian cell culture, we find that Lefty can inhibit signaling by Nodal but not by Activin or TGFbeta1, which are EGF-CFC independent. We show that Lefty can interact with Nodal in solution and thereby block Nodal from binding to activin receptors. Furthermore, Lefty can also interact with EGF-CFC proteins and prevent their ability to form part of a Nodal receptor complex. Our results provide mechanistic insights into how Lefty proteins can achieve efficient and stringent regulation of a potent signaling factor.