Previously, based on high ALDH activity, we showed that cancer stem cells (CSCs) could be identified as ALDH(br) cells from an aggressive human osteosarcoma OS99-1 cell line. In this study, we evaluate the impact of BMP-2 on CSCs.Three types of BMP receptors were expressed in freshly sorted ALDH(br) cells. In vitro, growth of the sorted ALDH(br) cells was inhibited by BMP-2. Using RT-PCR analysis, BMP-2 was found to down-regulate the expression of embryonic stem cell markers Oct3/4, Nanog, and Sox-2, and up-regulate the transcription of osteogenic markers Runx-2 and Collagen Type I. In vivo, all animals receiving ALDH(br) cells treated with BMP-2 did not form significant tumors, while untreated ALDH(br) cells developed large tumor masses in NOD/SCID mice. Immunostaining confirmed few Ki-67 positive cells were present in the sections of tumor containing ALDH(br) cells treated with BMP-2. These results suggest that BMP-2 suppresses tumor growth by reducing the gene expression of tumorigenic factors and inducing the differentiation of CSCs in osteosarcoma. BMP-2 or BMP-2-mimetic drugs, if properly delivered to tumor and combined with traditional therapies, may therefore provide a new therapeutic option for treatment of osteosarcoma.