Bone morphogenetic proteins 4 and 7 (BMP4 and BMP7) are morphogens that signal as either homodimers or heterodimers to regulate embryonic development and adult homeostasis. BMP4/7 heterodimers exhibit markedly higher signaling activity than either homodimer, but the mechanism underlying the enhanced activity is unknown. BMPs are synthesized as inactive precursors that dimerize and are then cleaved to generate both the bioactive ligand and prodomain fragments, which lack signaling activity. Our study reveals a previously unknown requirement for the BMP4 prodomain in promoting heterodimer activity. We show that BMP4 and BMP7 precursor proteins preferentially or exclusively form heterodimers when coexpressed in vivo. In addition, we show that the BMP4 prodomain is both necessary and sufficient for generation of stable heterodimeric ligands with enhanced activity and can enable homodimers to signal in a context in which they normally lack activity. Our results suggest that intrinsic properties of the BMP4 prodomain contribute to the relative bioactivities of homodimers versus heterodimers in vivo. These findings have clinical implications for the use of BMPs as regenerative agents for the treatment of bone injury and disease.B one morphogenetic proteins (BMPs) are members of the TGFβ superfamily that were originally isolated as boneinducing morphogens and were subsequently found to play central roles during embryogenesis and in adult homeostasis (1). BMPs are clinically important therapeutic agents that are used to reverse bone loss caused by trauma, disease, and tumor resection (2). Their use as regenerative agents is limited, however, by their short half-life and low specific activity when implanted in vivo. Understanding how BMP activity is regulated is important for the development of more effective therapeutic agents for the treatment of bone injury and disease.BMPs bind to and activate a receptor complex consisting of type I and type II transmembrane serine/threonine kinases. Following ligand binding, activated receptors propagate their signal by phosphorylating one of the SMADs that is specific for the BMP pathway (SMAD1, -5, or -8). The phosphorylated Smads then form heterooligomers with the common Smad, Smad4, and this complex translocates into the nucleus where it binds to BMP response elements and activates transcription of target genes (1).BMPs are classified into subfamilies based on sequence homology. They signal as either homodimers, or as heterodimers from different subfamilies. For example, class I BMPs, which consist of BMP2 and BMP4, can heterodimerize with class II BMPs, consisting of BMP5-8 (3). Heterodimers composed of distinct BMP family members show a higher specific activity than do homodimers of either subunit. Homodimers of BMP2, -4, or -7, for example, can all induce bone formation, but heterodimers of BMP2 plus BMP7, or BMP4 plus BMP7 are significantly more potent (5-to 20-fold) than any of the homodimers in osteogenic differentiation assays (4-6). BMP2/7 and BMP4/7 heterodimers also sho...