Transforming growth factor beta (TGF-beta) activates Ras/MAPK signaling in many cell types. Because TGF-beta and BMP-2 exert similar effects, we examined if this signaling is stimulated by both factors and analyzed the relationship between this signaling and the Smads in osteoblasts. BMP-2 and TGF-beta stimulated Ras, MAPK, and AP-1 activities. The DNA binding activities of c-Fos, FosB/Delta FosB, Fra-1, Fra-2, and JunB were up-regulated whereas JunD activity was decreased. c-Fos, FosB/Delta FosB, and JunB were associated with Smad4. The stimulation of AP-1 by BMP-2 and TGF-beta was dependent on Smad signaling, and anti-Smad4 antibody interfered with AP-1 activity. Thus, BMP-2 and TGF-beta activate both Ras/MAPK/AP-1 and Smad signaling in osteoblasts with Smads modulating AP-1 activity. To determine the roles of MAPK in BMP-2 and TGF-beta function, we analyzed the effect of ERK and p38 inhibitors on the regulation of bone matrix protein expression and JunB and JunD levels by these two factors. ERK and p38 mediated TGF-beta suppression of osteocalcin and JunD as well as stimulation of JunB. p38 was essential in BMP-2 up-regulation of type I collagen, fibronectin, osteopontin, osteocalcin, and alkaline phosphatase activity whereas ERK mediated BMP-2 stimulation of fibronectin and osteopontin. Thus, ERK and p38 differentially mediate TGF-beta and BMP-2 function in osteoblasts.