Bone morphogenetic proteins (BMPs) are members of the transforming growth factor-beta (TGF-beta) superfamily. Many BMPs are produced in bone and show osteogenic activity, suggesting that they may be determinants of bone mass. BMP3 was originally purified from bone as osteogenin, which induces osteogenic differentiation. Recombinant BMP3 (rhBMP3) has no biological activity, however, leaving its role in skeletal growth unclear. Here we show that BMP3 is an antagonist of osteogenic BMPs: BMP3 dorsalizes Xenopus laevis embryos, inhibits BMP2-mediated induction of Msx2 and blocks BMP2-mediated differentiation of osteoprogenitor cells into osteoblasts. These effects appear to be mediated through activin receptors. Finally, Bmp3(-/-) mice have twice as much trabecular bone as wild-type littermates, indicating that BMP3, the most abundant BMP in adult bone, is a negative determinant of bone density.