Herein, we have studied a consanguineous Egyptian family with two children diagnosed with severe autosomal recessive osteogenesis imperfecta (AR-OI) and a large umbilical hernia. Homozygosity mapping in this family showed lack of linkage to any of the previously known AR-OI genes, but revealed a 10.27 MB homozygous region on chromosome 8p in the two affected sibs, which comprised the procollagen I C-terminal propeptide (PICP) endopeptidase gene BMP1. Mutation analysis identified both patients with a Phe249Leu homozygous missense change within the BMP1 protease domain involving a residue, which is conserved in all members of the astacin group of metalloproteases. Type I procollagen analysis in supernatants from cultured fibroblasts demonstrated abnormal PICP processing in patient-derived cells consistent with the mutation causing decreased BMP1 function. This was further confirmed by overexpressing wild type and mutant BMP1 longer isoform (mammalian Tolloid protein [mTLD]) in NIH3T3 fibroblasts and human primary fibroblasts. While overproduction of normal mTLD resulted in a large proportion of proα1(I) in the culture media being C-terminally processed, proα1(I) cleavage was not enhanced by an excess of the mutant protein, proving that the Phe249Leu mutation leads to a BMP1/mTLD protein with deficient PICP proteolytic activity. We conclude that BMP1 is an additional gene mutated in AR-OI.