Among the bone morphogenetic protein (BMP) family, which plays a crucial role not only in bone formation but also in development, BMP-2, -4, and -7 participate predominantly in various aspects. To undertake complex tasks, their expression is strictly controlled. In this study we isolated and analyzed the 5'-flanking regions of the human BMP-4 and -7 genes to elucidate the mechanism of their temporally and spatially specific expression. As for BMP-4 expression, a reverse transcription-polymerase chain reaction (RT-PCR) assay with specially designed sets of primers demonstrated that osteoblastic SaOS-2 and Hos cells expressed two types of transcripts comprising one of the 5'-untranslated first exons, whereas MG63 cells displayed only the transcript with the BMP-4 proximal first exon. Likewise, RT-PCR revealed that Hos and MG63 cells expressed BMP-7. Subsequent 5'-RACE confirmed an alternative usage of the BMP-4 first exons with clustered multiple transcription start sites in the distal exon and the sole start site in the proximal exon. The transcription start site of the BMP-7 gene was found to be far upstream (764 bp) of the initiation ATG codon. We constructed a series of deletion mutants of fusions between these BMP promoters and the luciferase gene and examined their activity by transient transfection into osteoblastic Hos and renal COS-7 cells. The degree of distal and proximal BMP-4 promoter activity was in accordance with the expression level of the corresponding transcripts. Both distal and proximal BMP-4 promoters possessed suppressor elements that are operative only in Hos cells. The positive and negative elements identified in the BMP-7 promoter were more remarkably effective in Hos cells. The activities of the respective BMP-4 promoters and BMP-7 promoter were all stimulated upon the cotransfection of a potential sonic hedgehog (SHH) mediator, Gli1 or Gli3 into COS-7 cells, providing direct evidence that the Gli proteins are capable of inducing the BMP expression. Our systems are helpful for assessment of the complicated interactions of molecules involved in the skeletogenesis and developmental processes.