Skeletal homeostasis is determined by systemic hormones and local factors. Bone morphogenetic proteins (BMP) are unique because they induce the differentiation of mesenchymal cells toward cells of the osteoblastic lineage and also enhance the differentiated function of the osteoblast. However, the activity of BMPs needs to be tempered by intracellular and extracellular antagonists. BMPs bind to specific receptors and signal by phosphorylating the cytoplasmic proteins mothers against decapentaplegic (Smad) 1 and 5, which form heterodimers with Smad 4, and after nuclear translocation regulate transcription. BMP antagonists can be categorized as pseudoreceptors that compete with signaling receptors, inhibitory Smads that block signaling, intracellular binding proteins that bind Smad 1 and 5, and factors that induce ubiquitination and proteolysis of signaling Smads. In addition, a large number of extracellular proteins that bind BMPs and prevent their binding to signaling receptors have emerged. They are the components of the Spemann organizer, noggin, chordin, and follistatin, members of the Dan/Cerberus family, and twisted gastrulation. The antagonists tend to be specific for BMPs and are regulated by BMPs, indicating the existence and need of local feedback mechanisms to temper BMP cellular activities.