The bone morphogenetic protein (BMP) signaling cascade is aberrantly activated in human non-small cell lung cancer (NSCLC) but not in normal lung epithelial cells, suggesting that blocking BMP signaling may be an effective therapeutic approach for lung cancer. Previous studies demonstrated that some BMP antagonists, which bind to extracellular BMP ligands and prevent their association with BMP receptors, dramatically reduced lung tumor growth. However, clinical application of protein-based BMP antagonists is limited by short half-lives, poor intra-tumor delivery as well as resistance caused by potential gain-of-function mutations in the downstream of the BMP pathway. Small molecule BMP inhibitors which target the intracellular BMP cascades would be ideal for anticancer drug development. In a zebrafish embryo-based structure and activity study, we previously identified a group of highly selective small molecule inhibitors specifically antagonizing the intracellular kinase domain of BMP type I receptors. In the present study, we demonstrated that DMH1, one of such inhibitors, potently reduced lung cell proliferation, promoted cell death, and decreased cell migration and invasion in NSCLC cells by blocking BMP signaling, as indicated by suppression of Smad 1/5/8 phosphorylation and gene expression of Id1, Id2 and Id3. Additionally, DMH1 treatment significantly reduced the tumor growth in human lung cancer xenograft model. In conclusion, our study indicates that small molecule inhibitors of BMP type I receptors may offer a promising novel strategy for lung cancer treatment.