Little is known about the signaling mechanisms that determine the highly regular patterning of the intestinal epithelium into crypts and villi. With the use of mouse models, we show that bone morphogenetic protein (BMP)–4 expression occurs exclusively in the intravillus mesenchyme. Villus epithelial cells respond to the BMP signal. Inhibition of BMP signaling by transgenic expression of noggin results in the formation of numerous ectopic crypt units perpendicular to the crypt-villus axis. These changes phenocopy the intestinal histopathology of patients with the cancer predisposition syndrome juvenile polyposis (JP), including the frequent occurrence of intraepithelial neoplasia. Many JP cases are known to harbor mutations in BMP pathway genes. These data indicate that intestinal BMP signaling represses de novo crypt formation and polyp growth.