Myelination by oligodendrocytes in the central nervous system (CNS) is essential for proper brain function, yet the molecular determinants that control this process remain poorly understood. The basic helix-loop-helix transcription factors Olig1 and Olig2 promote myelination, whereas bone morphogenetic protein (BMP) and Wnt/b-catenin signaling inhibit myelination. Here we show that these opposing regulators of myelination are functionally linked by the Olig1/2 common target Smad-interacting protein-1 (Sip1). We demonstrate that Sip1 is an essential modulator of CNS myelination. Sip1 represses differentiation inhibitory signals by antagonizing BMP receptor-activated Smad activity while activating crucial oligodendrocyte-promoting factors. Importantly, a key Sip1-activated target, Smad7, is required for oligodendrocyte differentiation and partially rescues differentiation defects caused by Sip1 loss. Smad7 promotes myelination by blocking the BMP and b-catenin-negative regulatory pathways. Thus, our findings reveal that Sip1-mediated antagonism of inhibitory signaling is critical for promoting CNS myelination and point to new mediators for myelin repair.