Coordinated regulation of the activities of bone morphogenetic protein (BMP) and its inhibitors is essential for skeletal development since loss-of-function experiments show that both BMPs and BMP inhibitory signals, such as noggin, are required to establish proper formation of skeletal tissues. In this paper, we asked how and when noggin would be functional to interact with BMPs during skeletogenesis in mammals. For this purpose, we first analyzed the spatial and temporal patterns of noggin, BMP-2, BMP-4, and BMP-7 expression during early skeletogenesis in mouse embryos. In situ hybridization study revealed that noggin expression was detected at a low level in limb mesenchyme, whereas BMP-7 was expressed at a high level throughout limb mesenchyme 10.5 days postcoitum (dpc) in mouse embryos. One day later, noggin mRNA was expressed at a high level in the prechondrogenic condensations in appendicular and axial skeletal primordia, where sox9 transcripts were also expressed. At this stage, noggin-expressing cells were surrounded by those expressing BMP-7. The chondrogenic cell condensation continued to express noggin transcripts in 12.5 dpc and 13.5 dpc embryos, and again the noggin-expressing cells within the cartilaginous tissue were surrounded by those expressing BMP-7. We further examined interaction of noggin and BMPs by using organ cultures of 11.5 dpc mouse forelimbs and found that implantation of carriers containing BMP-7 protein into the forelimb explants induced noggin expression in the limb mesenchyme. BMP-7 also induced type II collagen and sox9 mRNAs in the same cell population, indicating that noggin induction occurred in the chondrogenic precursor cells. BMP-7 effects on noggin expression were observed in a dose-dependent manner within a dose range of 10-100 ng/microliter. These results suggest that BMP-7 induced expression of noggin transcripts within skeletal cell condensation and that this noggin expression in turn could act antagonistically to attenuate BMP action in the early skeletogenesis.