Previous studies have suggested that Bmp4 is a key Msx1-dependent mesenchymal odontogenic signal for driving tooth morphogenesis through the bud-to-cap transition. Whereas all tooth germs were arrested at the bud stage in Msx1(-/-) mice, we show that depleting functional Bmp4 mRNAs in the tooth mesenchyme, through neural crest-specific gene inactivation in Bmp4(f/f);Wnt1Cre mice, caused mandibular molar developmental arrest at the bud stage but allowed maxillary molars and incisors to develop to mineralized teeth. We found that expression of Osr2, which encodes a zinc finger protein that antagonizes Msx1-mediated activation of odontogenic mesenchyme, was significantly upregulated in the molar tooth mesenchyme in Bmp4(f/f);Wnt1Cre embryos. Msx1 heterozygosity enhanced maxillary molar developmental defects whereas Osr2 heterozygosity partially rescued mandibular first molar morphogenesis in Bmp4(f/f);Wnt1Cre mice. Moreover, in contrast to complete lack of supernumerary tooth initiation in Msx1(-/-)Osr2(-/-) mice, Osr2(-/-)Bmp4(f/f);Wnt1Cre compound mutant mice exhibited formation and subsequent arrest of supernumerary tooth germs that correlated with downregulation of Msx1 expression in the tooth mesenchyme. In addition, we found that the Wnt inhibitors Dkk2 and Wif1 were much more abundantly expressed in the mandibular than maxillary molar mesenchyme in wild-type embryos and that Dkk2 expression was significantly upregulated in the molar mesenchyme in Bmp4(f/f);Wnt1Cre embryos, which correlated with the dramatic differences in maxillary and mandibular molar phenotypes in Bmp4(f/f);Wnt1Cre mice. Together, these data indicate that Bmp4 signaling suppresses tooth developmental inhibitors in the tooth mesenchyme, including Dkk2 and Osr2, and synergizes with Msx1 to activate mesenchymal odontogenic potential for tooth morphogenesis and sequential tooth formation.