Summary Precise regulation of signal transduction is critical throughout organismal life, both for embryonic development and for adult homeostasis. To ensure proper spatio-temporal signal transduction, Bone Morphogenetic Protein (BMP) signaling pathways, like all other signaling pathways, are regulated by both agonists and antagonists. Here, we report identification of a previously unrecognized method of signal antagonism for Dpp (Decapentaplegic), a Drosophila BMP family member. We demonstrate that the BMP type I receptor Saxophone (Sax) functions as a Dpp receptor in the Drosophila embryonic epidermis, but that its activity is normally inhibited by the O-linked glycosyltransferase Super sex combs (Sxc). In wild-type embryos, inhibition of Saxophone (Sax) activity in the epidermis marks the BMP type I receptor Thickveins (Tkv) as the sole conduit for Dpp. In contrast, in sxc mutants, the Dpp signal is transduced by both Tkv and Sax, and elevated Dpp signaling induces errors in embryonic development that lead to embryonic death. We also demonstrate that Sax is the O-glycosylated target of Sxc and that O-glycosylation of Sax can be modulated by dietary sugar. Together, these findings link fertility to nutritive environment and point to Sax (activin receptor-like kinase 2 [ACVR1 or ALK2]) signaling as the nutrient-sensitive branch of BMP signaling. Graphical Abstract