Formation of the periodontium begins following onset of tooth-root formation in a coordinated manner after birth. Dental follicle progenitor cells are thought to form the cementum, alveolar bone and Sharpey's fibers of the periodontal ligament (PDL). However, little is known about the regulatory morphogens that control differentiation and function of these progenitor cells, as well as the progenitor cells involved in crown and root formation. We investigated the role of bone morphogenetic protein-2 (Bmp2) in these processes by the conditional removal of the Bmp2 gene using the Sp7-Cre-EGFP mouse model. Sp7-Cre-EGFP first becomes active at E18 in the first molar, with robust Cre activity at postnatal day 0 (P0), followed by Cre activity in the second molar, which occurs after P0. There is robust Cre activity in the periodontium and third molars by 2 weeks of age. When the Bmp2 gene is removed from Sp7(+) (Osterix(+)) cells, major defects are noted in root, cellular cementum and periodontium formation. First, there are major cell autonomous defects in root-odontoblast terminal differentiation. Second, there are major alterations in formation of the PDLs and cellular cementum, correlated with decreased nuclear factor IC (Nfic), periostin and α-SMA(+) cells. Third, there is a failure to produce vascular endothelial growth factor A (VEGF-A) in the periodontium and the pulp leading to decreased formation of the microvascular and associated candidate stem cells in the Bmp2-cKO(Sp7-Cre-EGFP). Fourth, ameloblast function and enamel formation are indirectly altered in the Bmp2-cKO(Sp7-Cre-EGFP). These data demonstrate that the Bmp2 gene has complex roles in postnatal tooth development and periodontium formation.