Mature oligodendrocytes myelinate axons in the CNS. The development of the myelin sheath is dependent on the proper maturation of oligodendrocytes from precursors cells, a spatially restricted process that is regulated by inductive and repressive cues. Several members of the bone morphogenetic protein family (BMP2 and 4) have been implicated as repressors of oligodendrocyte development in vitro by shifting oligodendrocyte precursors into the astrocyte lineage. We now report on a second role of BMPs in oligodendrocyte development, regulation of myelin protein expression in immature oligodendrocytes. Purified immature rodent oligodendrocytes treated with BMP4 maintained galactocerebroside (GalC) expression, whereas the expression of three key myelin proteins, proteolipid protein (PLP), myelin basic protein (MBP), and 2'-3'-cyclic nucleotide 3'-phosphodiesterase (CNP), was severely decreased. Paradoxically, BMP-treated oligodendrocytes show increased process extension and complexity, normally a feature of oligodendrocyte maturation. We also investigated whether BMP4 could inhibit myelin protein expression in an E 12.5 mouse explant culture of cervical spinal cord and hindbrain that maintains the in vivo cellular relationships and architecture. Beads soaked in BMP protein implanted into these explants inhibited the expression of myelin proteins, proteolipid protein, and myelin-associated glycoprotein (MAG), in the local area surrounding the bead. Since these explants also contained precursors cells, expression of galactocerebroside and O4, an oligodendrocyte marker, were also decreased by BMP treatment but to a much lesser degree than the myelin markers. Together, these data indicate that BMPs have multiple roles in oligodendrocyte development. At earlier stages, they affect cell lineage decisions and at later stages, they inhibit cell specialization.