Basic helix-loop-helix (bHLH) transcription factors are known as key regulators for mesenchymal differentiation. The present study showed that overexpression of Twist-1, a bHLH transcription factor, suppresses bone morphogenetic protein (BMP)-induced osteoblast differentiation, and downregulation of endogenous Twist-1 enhances BMP signaling. Maximal inhibition of BMP signaling was observed when Twist-1 was bound to E47, which markedly enhanced the stability of Twist-1. Co-immunoprecipitation assays revealed that Twist-1 formed a complex with Smad4 and histone deacetylase (HDAC) 1 in MC3T3-E1 cells stably expressing Twist-1. With trichostatin, an HDAC inhibitor, osteogenic factors such as alkaline phosphatase, Runx2 and osteopontin increased. Those results suggested that Twist-1 inhibited BMP signaling by recruiting HDAC1 to Smad4. Furthermore, the inhibitory effects of Twist-1 on BMP signaling were overcome by Id1 through induction of Twist-1 degradation. These findings suggest that Twist-1 can act as an inhibitor of BMP signaling, and Id1 can regulate BMP signaling through a positive feedback loop repressing Twist-1 function. These two molecules may therefore regulate differentiation of mesenchymal cells into progeny such as osteoblasts by controlling BMP signaling.