The aim of this study was to explore the molecular mechanism of the bone morphogenetic protein-7 (BMP-7) downregulation of Snail-mediated E-cadherin repression and mesenchymal-epithelial transition (MET) induction, since little is presently known about this issue. In this study, our aim was to elucidate the underlying mechanism by which cells acquire liver fibrosis characteristics after epithelial-mesenchymal transition (EMT). Cell cultures were exposed to Snail alone or in the presence of BMP-7; control cultures were exposed to medium only. The expression of the mRNA encoding α-smooth muscle actin (α-SMA), Snail and E-cadherin in rat liver epithelial cells was determined by real-time quantitative PCR (RT-PCR) and the main results were confirmed by ELISA. Cell differentiation was determined by analysis of the expression of α-SMA, Snail and E-cadherin by western blotting and co-immunoprecipitation. We demonstrated Snail-induced upregulation of mRNAs encoding α-SMA and downregulation of mRNAs encoding E-cadherin in rat liver epithelial cells when compared with unstimulated cells, and confirmed these results at the protein level. BMP-7 downregulated Snail-induced α-SMA and upregulated E-cadherin release compared with untreated and Snail-treated cells. In summary, we demonstrated that BMP-7 induces MET through decreased downregulation of Snail. In addition, Snail1 directly regulates Nanog promoter activity. Notch signaling is also involved in this process.