Dialysis dependency is one of the leading causes of morbidity and mortality in the world, and once end-stage renal disease develops, it cannot be reversed by currently available therapy. Although administration of large doses of bone morphogenetic protein–7 (BMP-7) has been shown to repair established renal injury and improve renal function, the pathophysiological role of endogenous BMP-7 and regulatory mechanism of its activities remain elusive. Here we show that the product of uterine sensitization-associated gene–1 (USAG1), a novel BMP antagonist abundantly expressed in the kidney, is the central negative regulator of BMP function in the kidney and that mice lacking USAG-1 (USAG1^–/– mice) are resistant to renal injury. USAG1^–/– mice exhibited prolonged survival and preserved renal function in acute and chronic renal injury models. Renal BMP signaling, assessed by phosphorylation of Smad proteins, was significantly enhanced in USAG1^–/– mice with renal injury, indicating that the preservation of renal function is attributable to enhancement of endogenous BMP signaling. Furthermore, the administration of neutralizing antibody against BMP-7 abolished renoprotection in USAG1^–/– mice, indicating that USAG-1 plays a critical role in the modulation of renoprotective action of BMP and that inhibition of USAG-1 is a promising means of development of novel treatment for renal diseases.