The intestinal epithelium possesses a remarkable self-renewal ability, which is mediated by actively proliferating Lgr5+ stem cells. Bone morphogenetic protein (BMP) signalling represents one major counterforce that limits the hyperproliferation of intestinal epithelium, but the exact mechanism remains elusive. Here we demonstrate that epithelial BMP signalling plays an indispensable role in restricting Lgr5+ stem cell expansion to maintain intestinal homeostasis and prevent premalignant hyperproliferation on damage. Mechanistically, BMP inhibits stemness of Lgr5+ stem cells through Smad-mediated transcriptional repression of a large number of stem cell signature genes, including Lgr5, and this effect is independent of Wnt/β-catenin signalling. Smad1/Smad4 recruits histone deacetylase HDAC1 to the promoters to repress transcription, and knockout of Smad4 abolishes the negative effects of BMP on stem cells. Our findings therefore demonstrate that epithelial BMP constrains the Lgr5+ stem cell self-renewal via Smad-mediated repression of stem cell signature genes to ensure proper homeostatic renewal of intestinal epithelium.