Prostate is a male sex-accessory organ. The prostatic epithelia consist primarily of basal and luminal cells that differentiate from embryonic urogenital sinus epithelia. Prostate tumors are believed to originate in the basal and luminal cells. However, factors that promote normal epithelial differentiation have not been well elucidated, particularly for bone morphogenetic protein (Bmp) signaling. This study shows that Bmp signaling prominently increases during prostatic differentiation in the luminal epithelia, which is monitored by the expression of phosphorylated Smad1/5/8. To elucidate the mechanism of epithelial differentiation and the function of Bmp signaling during prostatic development, conditional male mutant mouse analysis for the epithelial-specific Bmp receptor 1a (Bmpr1a) was performed. We demonstrate that Bmp signaling is indispensable for luminal cell maturation, which regulates basal cell proliferation. Expression of the prostatic epithelial regulatory gene Nkx3.1 was significantly reduced in the Bmpr1a mutants. These results indicate that Bmp signaling is a key factor for prostatic epithelial differentiation, possibly by controlling the prostatic regulatory gene Nkx3.1.