TGF-beta is a therapeutic target for renal fibrosis. Scientists have long sought ways to antagonize TGF-beta to ameliorate diabetic nephropathy. Bone morphogenetic protein (BMP-2) is a member of the TGF-beta superfamily and is highly regulated in the kidney. Thus, the role of BMP-2 was investigated in NRK-49F cells (rat fibroblasts). We showed that TGF-beta1 induces an increase in fibronectin. Treatment with exogenous BMP-2 or pCMV-BMP-2 significantly reversed the TGF-beta1-induced increase in fibronectin concomitant with a significant decrease in type I TGF-beta receptors (TGF-beta RI). Moreover, BMP-2 significantly shortened the half-life of TGF-beta RI. These results are related to proteosomal activation because MG132, a proteasome inhibitor, abolished BMP-2-mediated degradation of TGF-beta RI. This was confirmed because BMP-2 time course dependently enhanced the ubiquitination level of TGF-beta RI. In addition, Smads would seem to be involved in the interaction of BMP-2 and TGF-beta. We demonstrated that BMP-2 significantly reversed the TGF-beta1-induced increase in pSmad2/3 and reversed the TGF-beta1-induced decrease in inhibitory Smad7. Most importantly, Smad7 small interfering RNA abolished the BMP-2-induced decrease in TGF-beta RI. We evaluated the clinical efficacy of BMP-2 using unilateral ureteral obstruction rats. BMP-2 was administered ip for 7 d. In the unilateral ureteral obstruction kidneys, interstitial fibrosis was prominent. However, treatment with BMP-2 dramatically reduced Masson's trichrome staining (collagen) in the interstitial and tubular areas of the kidneys concomitantly with a reduction in TGF-beta RI. These results suggest that BMP-2 acts as a novel fibrosis antagonizing cytokine partly by down-regulating TGF-beta RI and Smads.