Promoting oligodendrocyte (OL) differentiation represents a promising option for remyelination therapy for treating the demyelinating disease multiple sclerosis (MS). The Wnt effector transcription factor 7-like 2 (TCF7l2) was upregulated in MS lesions and had been proposed to inhibit OL differentiation. Recent data suggest the opposite yet underlying mechanisms remain elusive. Here, we unravel a previously unappreciated function of TCF7l2 in controlling autocrine bone morphogenetic protein (BMP)4-mediated signaling. Disrupting TCF7l2 in mice of both sexes results in oligodendroglial-specific BMP4 upregulation and canonical BMP4 signaling activation in vivo Mechanistically, TCF7l2 binds to Bmp4 gene regulatory element and directly represses its transcriptional activity. Functionally, enforced TCF7l2 expression promotes OL differentiation by reducing autocrine BMP4 secretion and dampening BMP4 signaling. Importantly, compound genetic disruption demonstrates that oligodendroglial-specific BMP4 deletion rescues arrested OL differentiation elicited by TCF7l2 disruption in vivo Collectively, our study reveals a novel connection between TCF7l2 and BMP4 in oligodendroglial lineage and provides new insights into augmenting TCF7l2 for promoting remyelination in demyelinating disorders such as MS.SIGNIFICANCE STATEMENT Incomplete or failed myelin repairs, primarily resulting from the arrested differentiation of myelin-forming oligodendrocytes (OLs) from oligodendroglial progenitor cells, is one of the major reasons for neurologic progression in people affected by multiple sclerosis (MS). Using in vitro culture systems and in vivo animal models, this study unraveled a previously unrecognized autocrine regulation of bone morphogenetic protein (BMP)4-mediated signaling by the Wnt effector transcription factor 7-like 2 (TCF7l2). We showed for the first time that TCF7l2 promotes oligodendroglial differentiation by repressing BMP4-mediated activity, which is dysregulated in MS lesions. Our study suggests that elevating TCF7l2 expression may be possible in overcoming arrested oligodendroglial differentiation as observed in MS patients.