Heterotopic ossification (HO) is the pathologic development of ectopic bone in soft tissues because of a local or systemic inflammatory insult, such as burn injury or trauma. In HO, mesenchymal stem cells (MSCs) are inappropriately activated to undergo osteogenic differentiation. Through the correlation of in vitro assays and in vivo studies (dorsal scald burn with Achilles tenotomy), we have shown that burn injury enhances the osteogenic potential of MSCs and causes ectopic endochondral heterotopic bone formation and functional contractures through bone morphogenetic protein-mediated canonical SMAD signaling. We further demonstrated a prevention strategy for HO through adenosine triphosphate (ATP) hydrolysis at the burn site using apyrase. Burn site apyrase treatment decreased ATP, increased adenosine 3′,5′-monophosphate, and decreased phosphorylation of SMAD1/5/8 in MSCs in vitro. This ATP hydrolysis also decreased HO formation and mitigated functional impairment in vivo. Similarly, selective inhibition of SMAD1/5/8 phosphorylation with LDN-193189 decreased HO formation and increased range of motion at the injury site in our burn model in vivo. Our results suggest that burn injury-exacerbated HO formation can be treated through therapeutics that target burn site ATP hydrolysis and modulation of SMAD1/5/8 phosphorylation.