Bone morphogenetic proteins (BMPs) induce osteoblastic differentiation of myoblasts via binding to cell surface receptors. Repulsive guidance molecules (RGMs) have been identified as BMP co-receptors. We report here that DRAGON/RGMb, a member of the RGM family, suppressed BMP signaling in C2C12 myoblasts via a novel mechanism. All RGMs were expressed in C2C12 cells that were differentiated into myocytes and osteoblastic cells, but RGMc was not detected in immature cells. In C2C12 cells, only DRAGON suppressed ALP and Id1 promoter activities induced by BMP-4 or by constitutively activated BMP type I receptors. This inhibition by DRAGON was dependent on the secretory form of the von Willbrand factor type D domain. DRAGON even suppressed BMP signaling induced by constitutively activated Smad1. Over-expression of neogenin did not alter the inhibitory capacity of DRAGON. Taken together, these findings indicate that DRAGON may be an inhibitor of BMP signaling in C2C12 myoblasts. We also suggest that a novel molecule(s) expressed on the cell membrane may mediate the signal transduction of DRAGON in order to suppress BMP signaling in C2C12 myoblasts.