Most endoplasmic reticulum (ER)-retained proteins contain a carboxy-terminal signal sequence called the ER retention signal motif such as the Lys-Asp-Glu-Leu (KDEL) motif. Using this molecular mechanism, we developed a new dominant-negative assay, designated the KDEL-tag trap assay, to negatively regulate secretion of disulfide bond-dependent protein dimers, as typified by TGF-beta superfamily proteins. First, we tested this method on the Nodal protein Xnr5, which is a well-studied mesoderm inducer in vertebrates. Tagging of Xnr5 protein with KDEL at the carboxy-terminus effectively blocked the secretion of Xnr5, resulting in complete inhibition of mesoderm induction in Xenopus embryogenesis. Second, we examined the usefulness of the KDEL-tag trap assay on BMPs, which are well-known negative regulators of neural induction and ventralizing factors during early development, and demonstrated that the functions of the BMP family proteins BMP4 and ADMP were blocked by the KDEL-tag trap assay. Moreover, the technical feasibility of the KDEL-tag trap assay was confirmed in a cell culture system using mouse osteoblasts. Taken together, these results suggest that the KDEL-tag trap assay can be adapted to inhibit a variety of plasma membrane or secreted proteins of a multimeric nature.