BMP signaling plays many important roles during organ development, including palatogenesis. Loss of BMP signaling leads to cleft palate formation. During development, BMP activities are finely tuned by a number of modulators at the extracellular and intracellular levels. Among the extracellular BMP antagonists is Noggin, which preferentialy binds to BMP2, BMP4 and BMP7, all of which are expressed in the developing palatal shelves. Here we use targeted Noggin mutant mice as a model for gain of BMP signaling function to investigate the role of BMP signaling in palate development. We find prominent Noggin expression in the palatal epithelium along the anterior-posterior axis during early palate development. Loss of Noggin function leads to overactive BMP signaling, particularly in the palatal epithelium. This results in disregulation of cell proliferation, excessive cell death, and changes in gene expression, leading to formation of complete palatal cleft. The excessive cell death in the epithelium disrupts the palatal epithelium integrity, which in turn leads to an abnormal palate-mandible fusion and prevents palatal shelf elevation. This phenotype is recapitulated by ectopic expression of a constitutively active form of BMPR-IA but not BMPR-IB in the epithelium of the developing palate; this suggests a role for BMPR-IA in mediating overactive BMP signaling in the absence of Noggin. Together with the evidence that overexpression of Noggin in the palatal epithelium does not cause a cleft palate defect, we conclude from our results that Noggin mediated modulation of BMP signaling is essential for palatal epithelium integrity and for normal palate development.