Abstract: The bone morphogenetic proteins (BMPs) play important roles in the regulation of multiple aspects of vertebrate development. BMPs signal through the cell surface receptors and downstream Smad molecules. Upon stimulation with BMP, Smad1, Smad5, and Smad8 are phosphorylated by the activated BMP receptors, form a complex with Smad4, and translocate into the nucleus, where they regulate the expression of BMP target genes. The activity of this signal pathway can be modulated both by extracellular factors that regulate the binding of BMPs to the receptor and by intracellular proteins that interact with the Smad proteins. We have shown that Ski is an important negative regulator of the Smad proteins. Ski can bind to the BMP-Smad protein complexes in response to BMP and repress their ability to activate BMP target genes through disruption of a functional Smad complex and through recruitment of transcriptional co-repressors. The antagonism of BMP signaling by Ski results in neural specification in Xenopus embryos and inhibition of osteoblast differentiation in mouse bone-marrow stromal progenitor cells. This ability to modulate BMP signaling by Ski may play an important role in the regulation of craniofacial, neuronal, and skeletal muscle development.