Molecules associated with the transforming growth factor β (TGF-β) superfamily, such as bone morphogenic proteins (BMPs) and TGF-β, are key regulators of inflammation, apoptosis and cellular transitions. Here we show that the BMP receptor activin-like kinase 3 (Alk3) is elevated early in diseased kidneys after injury. We also found that its deletion in the tubular epithelium leads to enhanced TGF-β1–Smad family member 3 (Smad3) signaling, epithelial damage and fibrosis, suggesting a protective role for Alk3-mediated signaling in the kidney. A structure-function analysis of the BMP-Alk3–BMP receptor, type 2 (BMPR2) ligand-receptor complex, along with synthetic organic chemistry, led us to construct a library of small peptide agonists of BMP signaling that function through the Alk3 receptor. One such peptide agonist, THR-123, suppressed inflammation, apoptosis and the epithelial-to-mesenchymal transition program and reversed established fibrosis in five mouse models of acute and chronic renal injury. THR-123 acts specifically through Alk3 signaling, as mice with a targeted deletion for Alk3 in their tubular epithelium did not respond to therapy with THR-123. Combining THR-123 and the angiotensin-converting enzyme inhibitor captopril had an additive therapeutic benefit in controlling renal fibrosis. Our studies show that BMP signaling agonists constitute a new line of therapeutic agents with potential utility in the clinic to induce regeneration, repair and reverse established fibrosis.