Bone morphogenetic protein (BMP) 4 exerts multiple biological effects on kidney and ureter development. To examine the role of BMP4 in glomerular morphogenesis, we generated transgenic mice with altered BMP4 function in podocytes by conferring tissue-specificity with the nephrin (Nphs1) promoter. At birth, Tg(Nphs1-Nog) mice, which had loss of BMP4 function in podocytes, were found to have glomerular microaneurysms, collapsed glomerular capillary tufts, enlarged Bowman's capsules, and fewer normal proximal tubules. Conversely, Tg(Nphs1-Bmp4) mice, which had increased BMP4 function in podocytes, demonstrated defects in glomerular capillary formation, but podocytes were not appreciably affected. The Tg(Nphs1-Nog) and Tg(Nphs1-Bmp4) mice shared morphological characteristics with the previously reported podocyte-specific Vegf-A over-expressing and knockout mice, respectively. Consistent with the morphological similarity, in situ hybridization revealed an intense signal for podocyte expression of Vegf in Tg(Nphs1-Nog) mice, whereas the signal was markedly suppressed in Tg(Nphs1-Bmp4) mice. However, in vitro studies with metanephroi failed to demonstrate a direct interaction between BMP4 or Noggin and VEGF in podocytes. Instead, immunostaining showed that phosphorylated Smads, the mediators of BMP signaling, are present in endothelial and/or mesangial cells, but not in podocytes, within the developing glomeruli. Therefore, this study suggests that podocyte-derived BMP plays an important role in glomerular capillary formation, perhaps by acting on non-podocyte glomerular cells in a paracrine fashion.