Transforming growth factor-β (TGF-β) plays a central role in hepatic fibrogenesis. This study investigated the function and mechanism of bone morphogenetic protein-2 (BMP-2) in regulation of hepatic fibrogenesis. BMP-2 expression in fibrotic liver was measured in human tissue microarray and mouse models of liver fibrosis induced by bile duct ligation surgery or carbon tetrachloride administration. Adenovirus-mediated BMP-2 gene delivery was used to test the prophylactic effect on liver fibrosis. Primary hepatic stellate cells (HSC), HSC-T6 and clone-9 cell lines were used to study the interplay between BMP-2 and TGF-β1. Hepatic BMP-2 was localized in parenchymal hepatocytes and activated HSCs and significantly decreased in human and mouse fibrotic livers, showing an opposite pattern of hepatic TGF-β1 contents. BMP-2 gene delivery alleviated the elevations of serum hepatic enzymes, cholangiocyte marker CK19, HSC activation markers, and liver fibrosis in both models. Mechanistically, exogenous TGF-β1 dose dependently reduced BMP-2 expression, whereas BMP-2 significantly suppressed expression of TGF-β and its cognate type I and II receptor peptides, as well as the induced Smad3 phosphorylation levels in primary mouse HSCs. Aside from its suppressive effects on cell proliferation and migration, BMP-2 treatment prominently attenuated the TGF-β1-stimulated α-SMA and fibronectin expression, and reversed the TGF-β1-modulated epithelial-to-mesenchymal transition marker expression in mouse HSCs. The mutual regulation between BMP-2 and TGF-β1 signaling axes may constitute the anti-fibrogenic mechanism of BMP-2 in the pathogenesis of liver fibrosis. BMP-2 may potentially serve as a novel therapeutic target for treatment of liver fibrosis.