The bone disease in multiple myeloma is caused by an uncoupling of bone formation from bone resorption. A key difference between patients with and patients without osteolytic lesion is that the latter have fewer and less active osteoblasts. Hepatocyte growth factor (HGF) is often produced by myeloma cells and is found at high concentrations in the bone marrow of patients with multiple myeloma. Here we show that HGF inhibited bone morphogenetic protein (BMP)-induced in vitro osteoblastogenesis. Thus, HGF inhibited BMP-induced expression of alkaline phosphatase in human mesenchymal stem cells (hMSCs) and the murine myoid cell line C2C12, as well as mineralization by hMSCs. Furthermore, the expression of the osteoblast-specific transcription factors Runx2 and Osterix was reduced by HGF treatment. HGF promoted proliferation of hMSCs, and the BMP-induced halt in proliferation was overridden by HGF, keeping the cells in a proliferative, undifferentiating state. BMP-induced nuclear translocation of receptor-activated Smads was inhibited by HGF, providing a possible explanation of how HGF inhibits BMP signaling. The in vitro data were supported by the observation of a negative correlation between HGF and a marker of osteoblast activity, bone-specific alkaline phosphatase (rho = -0.45, P = .008), in sera from 34 patients with myeloma. These observations suggest that HGF inhibits bone formation in multiple myeloma.