PURPOSE: We investigated a role of bone morphogenic protein 7 (BMP7), a member of the TGF-β superfamily on pathogenic mechanism of Graves orbitopathy (GO). The therapeutic effects of BMP7 on inflammation and fibrosis were evaluated in cultured Graves orbital fibroblasts. METHODS: Expression of BMP7 was compared in cultured orbital tissue explants from GO (n = 12) and normal control (n = 12) subjects using real-time PCR. Orbital fibroblasts were cultured from orbital connective tissues obtained from GO (n = 3) and normal control patients (n = 3). Cells were pretreated with recombinant human BMP7 (rhBMP7) before stimulation with TGF-β, IL-1β, and TNF-α. Fibrosis-related proteins and inflammatory cytokines were analyzed by Western blotting. The activation of signaling molecules in inflammation and fibrosis was also analyzed. RESULTS: The expressions of BMP7 mRNA were lower in GO orbital tissues than control. Fibrosis-related proteins, fibronectin, collagen 1α, and α-SMA induced by TGF-β were suppressed by treating rhBMP7, and rhBMP7 upregulated TGF-β induced SMAD1/5/8 protein expression, whereas downregulated SMAD2/3. Increased pro-inflammatory molecules, IL-6, IL-8, and intercellular adhesion molecule-1 (ICAM-1) by IL-1β or TNF-α were blocked by rhBMP7 treatment, and the expression of phosphorylated NFκB and Akt was suppressed by rhBMP7 treatment. CONCLUSIONS: BMP7 transcript levels were downregulated in Graves orbital tissues. Exogenous BMP7 treatment showed inhibitory effects on the production of profibrotic proteins and proinflammatory cytokines in orbital fibroblasts. Our results provide a molecular basis of BMP7 as a new potential therapeutic agent through the opposing mechanism of profibrotic TGF-β/SMAD signaling and proinflammatory cytokine production.