Epithelial-mesenchymal transition (EMT) and extracellular matrix (ECM) deposition in renal tubular epithelial cells are critical to diabetic nephropathy (DN) pathogenesis, but the underlying mechanisms remain undefined. Bone morphogenetic protein 7 (BMP-7) inhibits EMT and ECM accumulation in renal tubular epithelial cells cultured in presence of high glucose. Meanwhile, miRNA-21 (miR-21) downregulates Smad7, promoting EMT and ECM deposition. However, the association of BMP-7 with miR-21/Smad7 in DN is unknown. Here, NRK-52E cells incubated in presence of high glucose and STZ-induced C57BL diabetic mice were considered in vitro and in vivo models of DN, respectively. In both models, BMP-7 (mRNA/protein) amounts were decreased as well as Smad7 protein expression, while miR-21 expression and TGF-β1/Smad3 pathway activation were enhanced, accompanied by enhanced EMT and ECM deposition. Further, addition of BMP-7 human recombinant cytokine (rhBMP-7) and injection of the BMP-7 overexpression plasmid in diabetic mice markedly downregulated miR-21 and upregulated Smad7, reduced Smad3 activation without affecting TGF-β1 amounts, and prevented EMT and ECM accumulation. MiR-21 overexpression in the in vitro model downregulated Smad7, promoted EMT and ECM accumulation without affecting BMP-7 amounts, and miR-21 downregulation reversed it. By interfering with BMP-7 and miR-21 expression in high glucose conditions, miR-21 amounts and Smad3 phosphorylation were further decreased. Smad7 was then upregulated, and EMT and ECM deposition were inhibited; these effects were reversed after miR-21 overexpression. These findings suggest that BMP-7 decreases renal fibrosis in DN by regulating miR-21/Smad7 signaling, providing a theoretical basis for the development of novel and effective therapeutic drugs for DN.