Bone morphogenetic proteins (BMPs) and their endogenous inhibitors, including noggin, chordin and follistatin, have roles in pattern formation and fate specification of neuronal and glial cells during nervous system development. We have examined their influence on glial reactions in the injured central nervous system (CNS). We show that penetrating injuries to the brain and spinal cord resulted in the upregulation of BMP-2/4, BMP-7, and noggin, with the latter being expressed almost exclusively by reactive astrocytes at the injury site, and we show that astrocytes in vitro produce noggin. As BMPs have been shown to drive cultured NG2-positive oligodendrocyte precursors (OPCs) towards a multipotential phenotype (type II astrocytes), we investigated the effects of inhibiting noggin with a function-blocking antibody (noggin-FbAb). In vitro, BMP-driven conversion of OPCs to type 2 astrocytes was inhibited by noggin, an effect that was reversed by noggin-FbAb. Noggin-FbAb also increased the number of type 2 astrocytes generated from cultured OPCs exposed to an astrocyte feeder layer, consistent with astrocytes producing both BMPs and noggin. In knife cut injuries in vivo, noggin-FbAb treatment resulted in an increase in the number of NG2-positive cells and small GFAP-positive cells in the injury site, and the appearance of glial cells with the morphological and antigenic characteristics of type 2 astrocytes (as generated in vitro), with coexpression of both GFAP and NG2. This potential conversion of inhibitory OPCs to type 2 astrocyte-like cells in vivo suggests that endogenous BMPs, unmasked by noggin antagonism, might be exploited to manipulate cell fate following CNS trauma.