Fig. 6. Model for a biochemical pathway that regulates BMP signaling in the extracellular space. Tsg-BMP complexes can be bound by full-length Chordin to form a ternary complex that is a potent BMP antagonist. Xolloid cleaves Chordin releasing Tsg-BMP binary complexes and Chordin fragments. In the presence of full-length Chordin, the binary complex will re-bind to Chordin, re-forming the ternary complex. After all full-length Chordin is cleaved by Xolloid, however, Tsg is able to dislodge BMP from Chordin and to destabilize the Chordin proteolytic products, displacing the equilibrium. This model explains why Tsg has the dual ability to increase BMP antagonism by full-length Chordin and to promote BMP signaling after Xolloid cleavage.