Bone morphogenetic proteins (BMPs) play central roles in differentiation, development, and physiologic tissue remodeling. Recently, we have demonstrated that a protein inhibitor of activated STAT, PIASy, suppresses TGF-beta signaling by interacting with Sma and MAD-related protein 3 (Smad3). In this study, we examined a PIASy-dependent inhibitory effect on BMP signaling. PIASy expression was induced by BMP-2 stimulation and suppressed BMP-2-dependent Smad activity in hepatoma cells. Furthermore, BMP-2-regulated Smads directly bound to PIASy. We also demonstrated that the RING domain of PIASy played an important role in PIASy-mediated suppression of Smad activity. We here provide evidence that the inhibitory action of PIASy on BMP-regulated Smad activity was due to direct physical interactions between Smads and PIASy through its RING domain. (C) 2004 Elsevier Inc. All rights reserved.