Noggin is a secreted protein that inhibits the binding of bone morphogenetic proteins (BMPs) to their cognate receptor. Its role in human mesenchymal stem cell differentiation has not been well studied. Here, we studied the effect of noggin on human mesenchymal stem cell differentiation induced by inflammatory cytokines (activated T-cell conditioned medium (ACTTCM) or the combination of four T-cell cytokines, TNF-α, TGF-β, IFN-γ, and IL-17 (TTII)), BMPs, or dexamthasone (DEX). HMSC treated with TTII alone rapidly induced alkaline phosphatase (AlkP) activity. Inclusion of noggin resulted in an additive effect. Noggin acted additively with DEX to induce a significantly higher level of AlkP induction than either noggin or DEX alone. Noggin was examined for its ability to inhibit mineralization in long-term cultures of HMSC stimulated with BMP-2, BMP-6, BMP-7, DEX, or TTII. Surprisingly, noggin alone induced mineralization while it did not inhibit mineralization induced by TTII or BMP-2, BMP-6, or BMP-7. Interestingly, when HMSC were treated with both noggin and DEX they acted synergistically to induce mineralization nearly 3-fold over DEX alone and 30-fold over noggin alone. Reverse transcriptase-polymerase chain reaction (RT-PCR) analysis showed that T-cell cytokines induced noggin, Runx2, BMP-2, and osteocalcin gene expression, while noggin alone induced BMP-2 and osteocalcin gene expression, but not Runx2, although it increased the expression of ActRII, a receptor for BMP-2. These results suggest that in HMSC, the anabolic action of inflammation on bone formation occurs through the induction of noggin, which then induces BMP-2 receptor and BMP-2 leading to the activation of the differentiation process. J. Cell. Biochem. 100: 824–834, 2007. © 2006 Wiley-Liss, Inc.