Bone morphogenetic proteins (BMPs) play an essential role in skeletal tissue, as they induce the commitment of mesenchymal cells toward cells of the osteoblastic lineage and also enhance the differentiated function of the osteoblast. BMPs are required for skeletal development, maintenance of adult bone homeostasis and fracture healing. BMP actions are tempered by extracellular and intracellular signals that block BMP signal transduction at multiple levels. Identification of these BMP regulatory molecules allows us to investigate their role in diseases that affect skeletal function and could provide a novel therapeutic intervention point for treatment. Both extracellular and intracellular antagonists are regulated by BMPs, indicating the existence and need for local feedback mechanisms to modulate BMP biological responses.