Small-cell lung cancer (SCLC) is typically fatal if untreated. It is characterized by early and widespread metastases, and has the ability to rapidly develop resistance to chemotherapy. Bone morphogenetic protein 7 (BMP7), a member of the BMP family of signaling molecules, has been implicated in various types of cancer, particularly prostate cancer and breast cancer. However, there is little knowledge of the function of BMP7 in SCLC. The aim of the present study was to investigate the biological function of recombinant human (rh)BMP7 on SCLC cells and the underlying molecular basis for this regulatory mechanism. The effect of rhBMP7 on SCLC cell lines and associated signaling pathways was investigated. Results suggested that rhBMP7 significantly inhibited the proliferation, motility and invasion of SBC-3 and SBC-5 cells. However, rhBMP7 exhibited no effect on the apoptosis of SBC-5 cells, but promoted apoptosis of SBC-3 cells. Furthermore, cell cycle analysis revealed that rhBMP7 was able to increase the proportion of cells in G1 phase and decrease the S phase proportion. Total and membrane BMP receptor (BMPR)IA and BMPRIB were highly expressed in SBC-5 cells, whereas cytoplasmic BMPRIA and BMPRIB expression was higher in SBC-3 cells. However, activin A receptor type I expression was higher in SBC-3 cells in total and cytoplasmic proteins. Furthermore, following stimulation with rhBMP7, Smad2, Smad4 and p21 were downregulated. We hypothesized that rhBMP7 inhibited the progressiveness of SCLC cells by inducing G1 phase arrest and inhibiting S phase entry. The results of the present study indicated that BMP7 serves a key function in regulating the progression of SCLC.