The hypothesis that BMPs (bone morphogenetic proteins), which act early in gut morphogenesis, also regulate specification and differentiation in the developing enteric nervous system (ENS) was tested. Expression of BMP-2 and BMP-4, BMPR-IA (BMP receptor subunit), BMPR-IB, and BMPR-II, and the BMP antagonists, noggin, gremlin, chordin, and follistatin was found when neurons first appear in the primordial bowel at embryonic day 12 (E12). Agonists, receptors, and antagonists were detected in separated populations of neural crestand noncrest-derived cells. When applied to immunopurified E12 ENS precursors, BMP-2 and BMP-4 induced nuclear translocation of phosphorylated Smad-1 (Sma and Mad-related protein). The number of neurons developing from these cells was increased by low concentrations and decreased by high concentrations of BMP-2 or BMP-4. BMPs induced the precocious appearance of TrkC-expressing neurons and their dependence on neurotrophin-3 for survival. BMP-4 interacted with glial cell line-derived neurotrophic factor (GDNF) to enhance neuronal development but limited GDNF-driven expansion of the precursor pool. BMPs also promoted development of smooth muscle from mesenchymal cells immunopurified at E12. To determine the physiological significance of these observations, the BMP antagonist noggin was overexpressed in the developing ENS of transgenic mice under the control of the neuron-specific enolase promoter. Neuronal numbers in both enteric plexuses and smooth muscle were increased throughout the postnatal small intestine. These increases were already apparent by E18. In contrast, TrkC-expressing neurons decreased in both plexuses of postnatal nogginoverexpressing animals, again an effect detectable at E18. BMP-2 and/or BMP-4 thus limit the size of the ENS but promote the development of specific subsets of enteric neurons, including those that express TrkC.