Somatic cells can be reprogrammed to induced pluripotent stem cells (iPSCs) by expression of defined embryonic factors. However, little is known of the molecular mechanisms underlying the reprogramming process. Here we explore somatic cell reprogramming by exploiting a secondary mouse embryonic fibroblast model that forms iPSCs with high efficiency upon inducible expression of Oct4, Klf4, c-Myc, and Sox2. Temporal analysis of gene expression revealed that reprogramming is a multistep process that is characterized by initiation, maturation, and stabilization phases. Functional analysis by systematic RNAi screening further uncovered a key role for BMP signaling and the induction of mesenchymal-to-epithelial transition (MET) during the initiation phase. We show that this is linked to BMP-dependent induction of miR-205 and the miR-200 family of microRNAs that are key regulators of MET. These studies thus define a multistep mechanism that incorporates a BMP-miRNA-MET axis during somatic cell reprogramming.