Decreased hepcidin mobilizes iron, which facilitates erythropoiesis, but excess iron is pathogenic in β-thalassemia. Erythropoietin (EPO) enhances erythroferrone (ERFE) synthesis by erythroblasts, and ERFE suppresses hepatic hepcidin production through an unknown mechanism. The BMP/SMAD pathway in the liver is critical for hepcidin control, and we show that EPO suppressed hepcidin and other BMP target genes in vivo in a partially ERFE-dependent manner. Furthermore, recombinant ERFE suppressed the hepatic BMP/SMAD pathway independently of changes in serum and liver iron. In vitro, ERFE decreased SMAD1, SMAD5, and SMAD8 phosphorylation and inhibited expression of BMP target genes. ERFE specifically abrogated the induction of hepcidin by BMP5, BMP6, and BMP7 but had little or no effect on hepcidin induction by BMP2, BMP4, BMP9, or activin B. A neutralizing anti-ERFE antibody prevented ERFE from inhibiting hepcidin induction by BMP5, BMP6, and BMP7. Cell-free homogeneous time-resolved fluorescence assays showed that BMP5, BMP6, and BMP7 competed with anti-ERFE for binding to ERFE. We conclude that ERFE suppresses hepcidin by inhibiting hepatic BMP/SMAD signaling via preferentially impairing an evolutionarily closely related BMP subgroup of BMP5, BMP6, and BMP7. ERFE can act as a natural ligand trap generated by stimulated erythropoiesis to regulate the availability of iron. •ERFE suppresses BMP/SMAD signaling in vitro and in vivo.•ERFE inhibits hepcidin induction by BMP5, BMP6, and BMP7. Display omitted