Bone morphogenetic proteins (BMPs) control the expressions of many genes involved in bone formation. On the basis of our hypothesis that BMP2 stimulation-regulated gene expression plays a critical role in osteoblast differentiation, we performed genome-wide screening of messenger RNA from BMP2-treated and -untreated C2C12 cells using a DNA microarray technique. We found that the expressions of Gremlin1 and Gremlin2, which are known BMP antagonists, were bidirectionally regulated by BMP2. Gremlin1 was down-regulated by BMP2, while Gremlin2 was up-regulated in both time- and dose-dependent manners. Ablation of Gremlin1 or Gremlin2 enhanced osteoblast differentiation induced by BMP2. On the other hand, treatment with recombinant Gremlin1 inhibited BMP2-induced osteoblast differentiation. Furthermore, treatment with Smad4 siRNA and the p38 MAPK inhibitor SB203580 suppressed BMP2-induced Gremlin2 gene expression. The differential regulation of Gremlin1 and Gremlin2 gene expressions by BMP2 may explain the critical function of these genes during osteoblast differentiation.