We investigated whether impaired regulation of bone morphogenetic protein-2 (BMP-2) via epigenetic pathways is associated with renal cell carcinoma (RCC) pathogenesis. Expression and CpG methylation of the BMP-2 gene were analyzed using RCC cell lines, and 96 matched RCC and normal renal tissues. We also performed functional analysis using BMP-2 restored RCC cells. A significant association of BMP-2 mRNA expression was also found with advanced tumor stage and lymph node involvement, while lower BMP-2 mRNA expression was significantly associated with poor overall survival after radical nephrectomy. In RCC cells, BMP-2 restoration significantly inhibited cell proliferation, migration, invasion, and colony formation. In addition, BMP-2 overexpression induced p21(WAF1/CIP1) and p27(KIP1) expression, and cellular apoptosis in RCC cells. BMP-2 mRNA expression was significantly enhanced in RCC cells by 5-aza-2'-deoxycitidine treatment. The prevalence of BMP-2 promoter methylation was significantly greater and BMP-2 mRNA expression was significantly lower in RCC samples as compared to normal kidney samples. Furthermore, a significant correlation was found between BMP-2 promoter methylation and mRNA transcription in tumors. Aberrant BMP-2 methylation and the resultant loss of BMP-2 expression may be a useful molecular marker for designing improved diagnostic and therapeutic strategies for RCC.