Bone morphogenetic proteins (BMPs) are members of the transforming growth factor‐beta (TGF‐β) gene superfamily of growth and differentiation factors. Members of the BMP family were originally cloned and characterized by their ability to induce ectopic bone formation. Of the various BMPs cloned, the bone inductive ability of BMP‐7 (OP‐1) and BMP‐2 has been well characterized. Both BMP‐7 and ‐2 have been shown to have clinical utility in the healing of non‐union fractures. However, in spite of the various advances in BMP research, the physiological regulation of BMPs is not well understood. Here we studied the expression of BMP‐7 by cloning a 4.6‐kB fragment of the human BMP‐7 promoter (hBMP‐7p) and placing it upstream of a luciferase reporter. The promoter reporter construct was stably transfected into different cell backgrounds and its regulation by various factors was investigated. We show that retinoic acid (RA) treatment results in an upregulation of the hBMP‐7p reporter activity. This regulation of the hBMP‐7p was further confirmed by Northern blot, PCR, and Western blot analyses, which showed an increase in both BMP‐7 mRNA and protein expression upon treatment with RA. We further show that RA specifically upregulates expression of osteocalcin via activation of BMP‐7 mRNA and protein in vitro. Similarly, prostaglandin E₂ (PGE₂) treatment increases BMP‐7 mRNA and protein levels, but does not transcriptionally activate the hBMP‐7p. Additionally, in vivo expression of BMP‐7 in bone was increased upon PGE₂ treatment. In conclusion, RA and PGE₂ upregulate BMP‐7 protein expression both in vitro and in vivo. J. Cell. Physiol. 190: 207–217, 2002. © 2002 Wiley‐Liss, Inc.