Dialysis dependency is one of the leading causes of morbidity and mortality in the world, and once end-stage renal disease develops, it cannot be reversed by currently available therapy. Although administration of large doses of bone morphogenetic protein-7 (BMP-7) has been shown to repair established renal injury and improve renal function, the pathophysiological role of endogenous BMP-7 and regulatory mechanism of its activities remain elusive. Here we show that the product of uterine sensitization-associated gene-1 (USAG1), a novel BMP antagonist abundantly expressed in the kidney, is the central negative regulator of BMP function in the kidney and that mice lacking USAG-1 (USAG1 mice) are resistant to renal injury. USAG1 mice exhibited prolonged survival and preserved renal function in acute and chronic renal injury models. Renal BMP signaling, assessed by phosphorylation of Smad proteins, was significantly enhanced in USAG1 mice with renal injury, indicating that the preservation of renal function is attributable to enhancement of endogenous BMP signaling. Furthermore, the administration of neutralizing antibody against BMP-7 abolished renoprotection in USAG1 mice, indicating that USAG-1 plays a critical role in the modulation of renoprotective action of BMP and that inhibition of USAG-1 is a promising means of development of novel treatment for renal diseases.