Different working modes were proposed to explain how bone morphogenetic protein (BMP) type I and II receptors are involved in Smad phosphorylation cascades. In addition, both parathyroid hormone (PTH) and Wnts are also known to regulate phosphorylation of Smads. Here we established a mouse model in which a C-terminal truncated BMP type II receptor (BMPRII) is expressed specifically in osteoblasts as a dominant negative form in the BMP/Smad signaling pathway. Smad1/5/8 phosphorylation levels were reduced in bone marrow stromal cells from the transgenic mice. The sizes of embryos were smaller, and the mineralization of calvarial bones and lumbar vertebrae were delayed in mice expressing the transgene. In adult transgenic mice, total bone volume was reduced with no significant changes observed in cortical bone. Thus, osteoblast-targeted expression of dominant negative BMPRII leads to inhibited Smad1 phosphorylation, delayed skeletal development, and decreased bone formation in the adult mice. This study provides an in vivo tool to study the role of BMPRII in BMP/Smad signaling and the regulation of this pathway by PTH and Wnts.