Noggin is a glycoprotein that binds bone morphogenetic proteins (BMPs) selectively and, when added to osteoblasts, it opposes the effects of BMPs. However, the consequences of its continued expression in stromal cells are not known. We investigated the effects of noggin overexpression under the control of a constitutive promoter, on murine ST-2 stromal cells, and its impact on stromal cells from transgenic mice overexpressing noggin under the control of the osteocalcin promoter. ST-2 cells were transduced with a retroviral vector (pLPCX) or a vector driving noggin (pLPCX noggin). Untreated (pLPCX) ST-2 cells developed the appearance of mineralized nodules and expressed osteocalcin. pLPCX noggin delayed the appearance of mineralized nodules and prevented the expression of osteocalcin. Noggin also prevented the cortisol-dependent induction of peroxisome proliferator-activated receptor gamma2 and adipsin transcripts, indicating a generalized inhibition of cell differentiation. Primary stromal cells from noggin transgenic mice displayed impaired differentiation when compared to cells from wild-type animals and did not express osteocalcin mRNA. In conclusion, noggin arrests the differentiation of stromal cells, preventing cellular maturation.