Bone morphogenic protein (BMP)-7 is a 35-kDa homodimeric protein and a member of the transforming growth factor (TGF)-beta superfamily. BMP-7 expression is highest in the kidney, and its genetic deletion in mice leads to severe impairment of eye, skeletal and kidney development. Here we report that BMP-7 reverses TGF-beta1-induced epithelial-to-mesenchymal transition (EMT) by reinduction of E-cadherin, a key epithelial cell adhesion molecule. Additionally, we provide molecular evidence for Smad-dependent reversal of TGF-beta1-induced EMT by BMP-7 in renal tubular epithelial cells and mammary ductal epithelial cells. In the kidney, EMT-induced accumulation of myofibroblasts and subsequent tubular atrophy are considered key determinants of renal fibrosis during chronic renal injury. We therefore tested the potential of BMP-7 to reverse TGF-beta1-induced de novo EMT in a mouse model of chronic renal injury. Our results show that systemic administration of recombinant human BMP-7 leads to repair of severely damaged renal tubular epithelial cells, in association with reversal of chronic renal injury. Collectively, these results provide evidence of cross talk between BMP-7 and TGF-beta1 in the regulation of EMT in health and disease.