Bone morphogenic proteins (BMPs) play central roles in differentiation, development, and physiological tissue remodeling. Estrogens have key roles in a variety of biological events, such as the development and maintenance of numerous target tissues. Previous studies demonstrated that estrogens suppress BMP functions by repressing BMP gene expression. Here we present a novel mechanism for the inhibitory effect of estrogens on BMP function. BMP-2-induced activation of Sma and Mad (mothers against decapentaplegic)-related protein (Smad) activity and BMP-2-mediated gene expression were suppressed by 17ß-E2 in breast cancer cells and mesangial cells. E2-mediated inhibition of Smad activation was reversed by tamoxifen, an ER antagonist. We provide evidence that the inhibitory action of ER on Smad activity was due to direct physical interactions between Smads and ER, which represents a novel mechanism for the cross-talk between BMP and ER signaling pathways.