Abstract We have previously found that bone morphogenetic protein-2 (BMP-2), a member of the transforming growth factor-β family, induces cell-cycle arrest in the G1 phase and apoptotic cell death of HS-72 mouse hybridoma cells. In this study, we show that BMP-2 did not alter expression of cyclin D, cyclin E, cyclin-dependent kinase 2 (CDK2), CDK4, p27 KIP1, p16 INK4a, or p15 INK4b, but enhanced expression of p21 CIP1/WAF1. Accumulation of p21 CIP1/WAF1 resulted in increased binding of p21 CIP1/WAF1 to CDK4 and concomitantly caused a profound decrease in the in vitro retinoblastoma protein (Rb) kinase activity of CDK4. Furthermore, the ectopic expression of human papilloma virus type-16 E7, an inhibitor of p21 CIP1/WAF1 and Rb, reverted G1 arrest induced by BMP-2. Expression of E6/E7, without increasing the p53 level, blocked inhibition of Rb phosphorylation and G1 arrest, but did not attenuate cell death in BMP-treated HS-72 cells. Taken together, these results suggest that inhibition of Rb phosphorylation by p21 CIP1/WAF1 is responsible for BMP-2-mediated G1 arrest and that BMP-2-induction of apoptosis might be independent of Rb hypophosphorylation.