How TGF-beta-type ligands achieve signaling specificity during development is only partially understood. Here, we show that Dawdle, one of four Activin-type ligands in Drosophila, preferentially signals through Babo(c), one of three isoforms of the Activin Type-I receptor that are expressed during development. In cell culture, Dawdle signaling is active in the presence of the Type-II receptor Punt but not Wit, demonstrating that the Type-II receptor also contributes to the specificity of the signaling complex. During development, different larval tissues express unique combinations of these receptors, and ectopic expression of Babo(c) in a tissue where it is not normally expressed at high levels can make that tissue sensitive to Dawdle signaling. These results reveal a mechanism by which distinct cell types can discriminate between different Activin-type signals during development as a result of differential expression of Type-I receptor isoforms.