Bone morphogenetic proteins (BMPs) belong to the TGF-beta superfamily and play an important role in development and in many cellular processes. We have found that BMP-2, BMP-6, and BMP-9 induce the most potent osteogenic differentiation of mesenchymal stem cells. Expression profiling analysis has revealed that the Inhibitors of DNA binding/differentiation (Id)-1, Id-2, and Id-3 are among the most significantly up-regulated genes upon BMP-2, BMP-6, or BMP-9 stimulation. Here, we sought to determine the functional role of these Id proteins in BMP-induced osteoblast differentiation. We demonstrated that the expression of Id-1, Id-2, and Id-3 genes was significantly induced at the early stage of BMP-9 stimulation and returned to basal levels at 3 days after stimulation. RNA interference-mediated knockdown of Id expression significantly diminished the BMP-9-induced osteogenic differentiation of mesenchymal progenitor cells. Surprisingly, a constitutive overexpression of these Id genes also inhibited osteoblast differentiation initiated by BMP-9. Furthermore, we demonstrated that BMP-9-regulated Id expression is Smad4-dependent. Overexpression of the three Id genes was shown to promote cell proliferation that was coupled with an inhibition of osteogenic differentiation. Thus, our findings suggest that the Id helix-loop-helix proteins may play an important role in promoting the proliferation of early osteoblast progenitor cells and that Id expression must be down-regulated during the terminal differentiation of committed osteoblasts, suggesting that a balanced regulation of Id expression may be critical to BMP-induced osteoblast lineage-specific differentiation of mesenchymal stem cells.