The transcriptional activity of Runx2 is determined by associations with co-repressors including histone deacetylase 7 (HDAC7). We previously found that bone morphogenic protein 2 (BMP2) induces export of HDAC7 from the nucleus. In this study we demonstrate that BMP2 specifically stimulates redistribution of HDAC7 but not HDAC 4, 5, or 6. HDAC7 subcellular redistribution in mesenchymal cells requires Crm1-mediated nuclear export, is associated with increased HDAC7 serine phosphorylation, and requires conserved serines in the HDAC7 amino terminus. The protein kinase D (PKD) inhibitor Gö6976 blocked both basal and BMP2-directed HDAC7 nuclear export. Protein kinase D1 (PKD1) associated with HDAC7 in a BMP2-enhanced manner, and a constitutively active form of PKD1 stimulated HDAC7 nuclear export. Furthermore, active PKD1 inhibited repression of Runx2-mediated transcription by HDAC7. Suppression of HDAC7 was not sufficient to rescue BMP2 induction of osteoblast marker genes in Gö6976-treated cells, indicating that PKD-dependent factors beyond attenuation of HDAC7-repressive activity are required for osteoblast differentiation. These results establish a novel pathway by which BMP signaling regulates Runx2 activity via PKD-dependent inhibition of HDAC7 transcriptional repression.