is deficient to make way for infiltrating epithelial cells that go on to form the terminal buds (Weaver et al. 1999). It is also a region where both Bmper and Bmp4 are normally expressed (Bellusci et al. 1996 and Fig. S3), suggesting that without Bmper, Bmp4 activity is allowed to signal unabated, thereby reducing the amount of mesenchymal apoptosis, a theory that is supported by our in vitro measurements of proapoptotic activity of Bmper in explanted embryonic lung mesenchymal cells (Fig. 6, c and d). To confirm at the molecular level that the observed changes in Bmper +/ lung tissue were a result of increased Bmp signal- ing, we measured the amount of Id1, a downstream Bmp target (Hollnagel et al., 1999), in lung tissue of both Bmper +/ and wild-type mice by PCR (Fig. 7 c). As expected, there was an ap- preciable increase in Id1 expression in Bmper +/ lungs, further indicating that the reduction in Bmper expression leads to a pro- Bmp effect in this tissue. These data suggest that the failure of the lungs to mature in Bmper +/ mice is caused by sustained Bmp4 signaling in the distal region of the lung (resulting in a failure of the mesenchyme to recede) and not by a nonspecific secondary effect of delayed lung development. Collectively, these data support a tissue-specific and physiologically relevant anti-Bmp role for Bmper and are also consistent with the anti- Bmp effects of Bmper in the developing pupil wing of Drosoph- ila (Serpe et al., 2008). If increased Bmp activity in Bmper +/ mice is at least partially caused by impairment of Bmper-mediated Bmp4 endo- cytosis, then one would anticipate decreased cytoplasmic accu- mulation of Bmp4 in the cytosol of lung cells. In isolated cell preparations from mouse lung stripped of membrane, Bmp4 was found to accumulate in the cytosol of wild-type lung cells in substantial levels, but was present in markedly reduced levels in both Bmper +/ and / lungs (Fig. 7 d), indicating that Bmper is necessary for optimal internalization of Bmp in vivo, as it is in vitro. These observations, combined with the afore- mentioned finding of increased Bmp signaling in Bmper +/ lung tissue and our in vitro studies, indicate strongly that Bmper exerts a physiologically relevant anti-Bmp effect and supports a mechanistic model whereby BMPER regulates Bmp signaling in part by promoting Bmp endocytosis and subsequent lyso- somal degradation. Endocytosis mediated by Gremlin and Noggin but not Chordin Discrete but overlapping developmental expression patterns of multiple Bmp regulators during patterning (Srinivasan et al., 2002; Ralston and Blair, 2005; Rentzsch et al., 2006) suggest mutually dependent interactions among these factors. The spec- ificity of Bmper-mediated endocytosis of Bmp4 prompted us to test the effects of recombinant Chordin, Noggin, and Gremlin on Bmp4-mediated Smad activation and endocytosis to deter- mine the extent to which this novel endocytic mechanism ex- tends to other classical extracellular regulators of Bmp signaling. Under all conditions tested, Bmper induced Bmp4 internaliza- tion while reducing Bmp4-mediated Smad activity to a level intermediate to that of Bmp4-treated and untreated cells (Fig. 8, a and b). Consistent with previous reports of their potent Bmp inhibitory activity, Noggin and Gremlin eliminated Bmp4-mediated Smad activation, irrespective of Bmper treat- ment, and led to Bmp4 endocytosis (Fig. 8 b, middle and bot- tom). The apparent affinities of Noggin and Gremlin for Bmp4 are higher than Bmper, as they abolished Bmper internalization and more potently reduced Bmp4-mediated Smad phosphoryla- tion. The ability of Noggin and Gremlin to induce Bmp4 inter- nalization suggests that endocytic internalization of Bmps also accounts, at least in part, for their ability to inhibit Bmp activity. In contrast, Chordin had no effect on Bmp4-induced Smad acti- vation or endocytosis. Although Chordin was inactive in the presence of Bmp4 alone, Bmper induced Chordin internaliza- tion. Interestingly, internalization of Bmp4, Bmper, and Chor- din were attenuated when all of these factors were present simultaneously (Fig. 8 c), suggesting that higher order protein complexes may actually suppress the endocytic mechanism. We conducted further studies to determine whether Noggin also targets Bmp4 for the lysosome and whether Bmper has this effect on Chordin (Fig. 8 c). The effects of Noggin on Bmp4 were similar to the effects of Bmper on Bmp4 (Fig. 8 c, middle), as Bmp4 was degraded during the cold chase, but not in the presence of chloroquine. The proteolytic processing of Bmp4 in the pres- ence of Noggin was not as thorough as when Bmp4 was in the presence of Bmper, suggesting there may be subtle differences in Bmp proteolysis and possibly the kinetics of elimination elicited by different Bmp modulators. Interestingly, Noggin was constitu- tively internalized by the endothelial cells. This is in contrast to Chordin, which was not internalized in the presence of Bmp4, whether or not Bmper was present. However, in the presence of Bmper alone under these culture conditions (Fig. 8, b and c), Chor- din was internalized and eliminated after a cold chase. Interest- ingly, intracellular Chordin did not accumulate after chloroquine chase. It is possible that internalized Chordin is eliminated by the cell independent of the lysosome (i.e., via proteasomal degrada- tion) or that the kinetics of its turnover differs from Noggin and Bmper. That the intracellular trafficking of Chordin is distinct from Bmper and Bmp modulators such as Noggin and Gremlin may re- flect the higher affinity of Bmper for a Bmp4–Chordin complex than it does for Chordin alone. Collectively, these data suggest a complex and competitive interplay among Bmp modulators for Bmps and underscore a generalized role for activities within the endocytic compartments among selective Bmp modulators. Discussion Several models have been proposed to explain the anti- and pro- Bmp mechanisms of Bmper (Coles et al., 2004). Recently, a pa- per using biochemical and genetic studies in Drosophila proposes a model where Cv-2 can enhance and inhibit Bmp signaling at low and high concentrations, respectively (Serpe et al., 2008). Dependency on concentration and proteolytic cleavage have also been reported for other extracellular modulators of Bmp activity (Larrain et al., 2001). Our data provide an additional mechanism whereby proteolysis and concentration dependency fine-tune Bmp signaling through interactions with secreted proteins. Although both proteolytic activation and inactivation have been described for several Bmp factors, the degradation of se- creted Bmps are incompletely understood. To date, limited data ENDOCYTIC REGULATION OF BMP SIGNALING BY BMPER • Kelley et al. 605