Exogenous administration of recombinant human bone morphogenetic protein (BMP)-7 was recently shown to ameliorate renal glomerular and interstitial fibrosis in rodents with experimental renal diseases. We tested the hypothesis that BMP7 functions by antagonizing profibrogenic events that are induced by transforming growth factor (TGF)-beta in cultured mesangial cells. Incubation of murine mesangial cells with TGF-beta (50-200 pM) increased cell-associated collagen type IV and fibronectin, soluble collagen type IV, thrombospondin, and connective tissue growth factor (CTGF). Coincubation with recombinant human BMP7 (200 pM) reduced the increase of these ECM proteins and CTGF. The changes in collagen type IV and fibronectin proteins occurred without concomitant changes in collagen type alpha(1)IV and fibronectin mRNA levels, suggesting that TGF-beta and BMP7 act primarily by affecting ECM protein degradation. Indeed, TGF-beta decreases the levels and activity of matrix metalloprotease (MMP)-2, the major metalloprotease that is secreted by mesangial cells. Moreover, BMP7 inhibits TGF-beta-induced activation of MMP2. Because TGF-beta reduces the activity of MMPs through increasing plasminogen activator inhibitor (PAI)-1, we tested whether BMP7 interferes with this TGF-beta effect. BMP7 reduces, by about two-thirds, the activation of a PAI-1 promoter/luciferase reporter in cells stably transfected with this construct. The findings from these studies indicate that BMP7 reduces TGF-beta-induced ECM protein accumulation in cultured mesangial cells primarily by maintaining levels and activity of MMP2 partially through prevention of TGF-beta-dependent upregulation of PAI-1.