Background: Prostate morphogenesis initiates in the urogenital sinus (UGS) with epithelial bud development. Sulfatase-1 (SULF1) inhibits bud development by reducing extracellular heparan sulfate (HS) 6-O sulfation and impairing FGF10 signaling by means of the ERK1/2 mitogen activated kinases. Results: We characterized the expression patterns of HS 6-O sulfation modifying enzymes in the developing prostate by in situ hybridization and showed that Sulf1 and Hs6st1 had overlapping but distinct expression domains. Notably, Hs6st1 was present while Sulf1 was excluded from the tips of elongating epithelial buds. This predicted relatively high HS 6-O sulfation at the tips of elongating epithelial buds that was confirmed by immunohistochemistry. The pattern of Sulf1 expression in the peri-mesenchymal epithelium matched predicted locations of bone morphogenetic protein (BMP) signaling. Exogenous BMP4 and BMP7 induced Sulf1 expression in the UGS, decreased epithelial HS 6-O sulfation, and reduced ERK1/2 activation in response to FGF10. Conclusions: These data suggest that BMPs limit FGF10 action in the developing prostate at least in part by inducing Sulf1. Developmental Dynamics, 2012. © 2012 Wiley Periodicals, Inc.