We have isolated osteoclast precursors (OCPs) from cocultures of mouse calvarial cells and bone marrow cells without adding any osteotropic factors. OCPs expressed Mac-1, Mac-2, and Gr-1 antigens but not osteoclast markers such as tartrate-resistant acid phosphatase (TRAP) and calcitonin receptors, and they differentiated into TRAP-positive cells within 48 h on a fixed calvarial cell layer pretreated with osteotropic factors such as 1 alpha, 25-dihydroxyvitamin D3. In the present study, we investigated the regulatory mechanisms of OCP formation from hemopoietic cells and TRAP-positive cell formation from OCPs. Calvarial osteoblasts obtained from macrophage-colony stimulating factor (M-CSF)-deficient op/op mice failed to support OCP formation or the differentiation of OCPs into TRAP-positive cells. Both OCP formation and TRAP-positive cell formation supported by osteoblasts were completely inhibited by osteoclastogenesis inhibitory factor (OCIF, also called OPG), which is a decoy receptor of osteoclast differentiation factor (ODF; also called TRANCE, RANKL, and OPGL). When bone marrow cells were cultured for 4 days with soluble ODF (sODF/sRANKL) together with M-CSF, OCPs were formed even in the absence of osteoblasts. When OCPs were treated with sODF/sRANKL and M-CSF in the absence of osteoblasts, they differentiated into TRAP-positive cells within 48 h even in the presence of hydroxyurea. Northern blotting analysis revealed that osteoblasts constitutively expressed a certain level of ODF/RANKL mRNA. These results indicated that M-CSF and sODF/sRANKL produced by osteoblasts are two essential factors for both OCP formation and TRAP-positive osteoclast formation.