Satellite cells are the resident stem cells of adult skeletal muscle, supplying myonuclei for homoeostasis, hypertrophy and repair. In this study, we have examined the role of bone morphogenetic protein (BMP) signalling in regulating satellite cell function. Activated satellite cells expressed BMP receptor type 1A (BMPR-1A/Alk-3) and contained phosphorylated Smad proteins, indicating that BMP signalling is operating during proliferation. Indeed, exogenous BMP4 stimulated satellite cell division and inhibited myogenic differentiation. Conversely, interfering with the interactions between BMPs and their receptors by the addition of either the BMP antagonist Noggin or soluble BMPR-1A fragments, induced precocious differentiation. Similarly, blockade of BMP signalling by siRNA-mediated knockdown of BMPR-1A, disruption of the intracellular pathway by either Smad5 or Smad4 knockdown or inhibition of Smad1/5/8 phosphorylation with Dorsomorphin, also caused premature myogenic differentiation. BMP signalling acted to inhibit the upregulation of genes associated with differentiation, in part, through regulating Id1. As satellite cells differentiated, Noggin levels increased to antagonise BMP signalling, since Noggin knockdown enhanced proliferation and impeded myoblast fusion into large multinucleated myotubes. Finally, interference of normal BMP signalling after muscle damage in vivo perturbed the regenerative process, and resulted in smaller regenerated myofibres. In conclusion, BMP signalling operates during routine satellite cell function to help coordinate the balance between proliferation and differentiation, before Noggin is activated to antagonise BMPs and facilitate terminal differentiation.