Bone Morphogenetic Proteins (BMPs) play multiple and important roles in embryonic development as well as in homeostasis and tissue repair in the adult. Bmp7 has been implicated in developmental disorders and in a variety of diseases, but functional studies to elucidate its role so far have been hampered, since mice deficient in BMP7 die around or just after birth. To facilitate such studies, we generated mice in which the Bmp7 gene has been rendered conditional-null by flanking its first coding exon with loxP sites. To this end, we adapted the two-loxP site strategy to Bacterial Homologous Recombination to create a Bacterial Artificial Chromosome-based vector for direct targeting in mouse embryonic stem cells. Functional analysis showed that in vivo, the conditional-null Bmp7(flx/flx) mice are phenotypically wild type, whereas post Cre-mediated recombination, the resulting Bmp7(delta/delta) mice are phenotypically null. Thus, this study validates the usefulness of the Bmp7(flx/flx) mouse which in turn should empower in vivo studies aimed at elucidating the roles of Bmp7 in postnatal development, homeostasis and disease.