Both insulin and bone morphogenetic protein (BMP) signaling systems are important for adipocyte differentiation. Analysis of gene expression in BMP7-treated fibroblasts revealed a coordinated change in insulin signaling components by BMP7. To further investigate the cross talk between insulin and BMP signaling systems in brown adipogenesis, we examined the effect of BMP7 in insulin receptor substrate 1 (IRS-1)-deficient brown preadipocytes, which exhibit a severe defect in differentiation. Treatment of these cells with BMP7 for 3 days prior to adipogenic induction restored differentiation and expression of brown adipogenic markers. The high level of adipogenic inhibitor preadipocyte factor 1 (Pref-1) in IRS-1-null cells was markedly reduced by 3 days of BMP7 treatment, and analysis of the 1.3-kb pref-1 promoter revealed 9 putative Smad binding elements (SBEs), suggesting that BMP7 could directly suppress Pref-1 expression, thereby allowing the initiation of the adipogenic program. Using a series of sequential deletion mutants of the pref-1 promoter linked to the luciferase gene and chromatin immunoprecipitation, we demonstrate that the promoter-proximal SBE (-192/-184) was critical in mediating BMP7's suppressive effect on pref-1 transcription. Together, these data suggest cross talk between the insulin and BMP signaling systems by which BMP7 can rescue brown adipogenesis in cells with insulin resistance.