Bone morphogenetic proteins (BMPs) are highly conserved signaling molecules that are part of the transforming growth factor (TGF)-beta superfamily, and function in the patterning and morphogenesis of many organs including development of the dentition. The functions of the BMPs are controlled by certain classes of molecules that are recognized as BMP antagonists that inhibit BMP binding to their cognate receptors. In this study we tested the hypothesis that USAG-1 (uterine sensitization-associated gene-1) suppresses deciduous incisors by inhibition of BMP-7 function. We learned that USAG-1 and BMP-7 were expressed within odontogenic epithelium as well as mesenchyme during the late bud and early cap stages of tooth development. USAG-1 is a BMP antagonist, and also modulates Wnt signaling. USAG-1 abrogation rescued apoptotic elimination of odontogenic mesenchymal cells. BMP signaling in the rudimentary maxillary incisor, assessed by expressions of Msx1 and Dlx2 and the phosphorylation of Smad protein, was significantly enhanced. Using explant culture and subsequent subrenal capsule transplantation of E15 USAG-1 mutant maxillary incisor tooth primordia supplemented with BMP-7 demonstrated in USAG-1+/- as well as USAG-1-/- rescue and supernumerary tooth development. Based upon these results, we conclude that USAG-1 functions as an antagonist of BMP-7 in this model system. These results further suggest that the phenotypes of USAG-1 and BMP-7 mutant mice reported provide opportunities for regenerative medicine and dentistry.