BMP-2 plays an essential role in osteoblast and chondrocyte differentiation, but its signaling mechanism has not been fully defined. In the present studies, we investigated the mechanism through which BMP-2 activates the Smad6 gene. A -2006/+45 Smad6 promoter-luciferase construct was generated along with deletions and Runx2 binding site mutations to examine the role of Smad1 and Runx2 signaling following BMP-2 stimulation in osteoblasts. Transfection of Runx2 or treatment with BMP-2-stimulated promoter activity of the -2006/+45 and -1191/+45 reporters but not the -829/+45 and -374/+45 reporters. No Smad1/5 binding site is present in the -1191/+829 region of the Smad6 promoter. Mutation of the OSE2-a site (-1036/-1031) completely abolished the stimulatory effect of Runx2 as well as BMP-2 on the -2006/+45 and -1191/+45 Smad6 reporters. Gel shift and chromatin immunoprecipitation (ChIP) assays showed that Runx2 binds the OSE2-a element. ChIP assays demonstrated that Smad1 also interacts with the OSE2-a site at the Smad6 promoter through Runx2. The protein degradation of Runx2 is mediated by the E3 ubiquitin ligase Smurf1. In the present studies, we found that Smurf1 binds the OSE2-a site through Runx2 and inhibits Smad6 gene transcription. Treatment with BMP-2 and transfection of Smad1 abolished Smurf1 binding to the OSE2 site. These results show that Smad1 binding excludes Smurf1 interaction with the OSE2 site and promotes Smad6 gene transcription.