Renal branching morphogenesis, defined as growth and branching of the ureteric bud (UB), is a tightly regulated process controlled by growth factor-dependent tissue interactions. Previously, using in vitro models of branching morphogenesis, we demonstrated that BMP2 signals via its intracellular effectors, SMAD1 and SMAD4, to control UB cell proliferation and branching in a manner modulated by Glypican-3 (GPC3), a cell surface heparan sulfate proteoglycan. Here, we used loss-of-function genetic mouse models to investigate the functions of Bmp2 and Gpc3-Bmp2 interactions in vivo. Progressively greater increases in UB cell proliferation were observed in Bmp2+/-, Smad4+/-, and Bmp2+/-; Smad4+/- mice compared to Wt. This increased cell proliferation was accompanied by a significant increase in UB branching in Smad4+/- and Bmp2+/-;Smad4+/- mice compared to Wt. Reduction of Gpc3 gene dosage also increased UB cell proliferation, an effect that was enhanced in Gpc3+/-;Bmp2+/- mice to an extent greater than the sum of that observed in Gpc3+/- and Bmp2+/- mice. Reduction of both Gpc3 and Bmp2 gene dosage enhanced cell proliferation in the metanephric mesenchyme compared to Wt, an effect not observed in either Bmp2+/- or Gpc3+/- mice. Phosphorylation of SMAD1, a measure of SMAD1 activation, was progressively decreased in Gpc3+/- and Gpc3+/-;Bmp2+/- mice compared to Wt, suggesting that Gpc3 stimulates Bmp2-dependent SMAD signaling in vivo. These results demonstrate that BMP2-SMAD signaling, modulated by GPC3, inhibits renal branching morphogenesis in vivo.