A novel bone-resorbing factor was cloned using an expression cloning technique, which involved a Xenopus oocyte expression system and an assay for osteoclast formation. A candidate clone was isolated from a BW5147 mouse T-lymphoma cell cDNA library. Sequencing analysis identified the factor as gamma-glutamyltranspeptidase (GGT), which is an enzyme involved in glutathione metabolism. The addition of purified GGT protein to mouse bone marrow culture effectively induced formation of osteoclasts. An antibody against GGT inhibited osteoclast formation but not the enzymatic activity. We also demonstrated that an inactive form of GGT, the enzymatic activity of which had been blocked by chemical modification with a specific inhibitor, acivicin, supported osteoclast formation. These results indicate that GGT acts on osteoclast formation independent of its own enzymatic activity. Furthermore, both native GGT and inactive GGT stimulated the expression of the receptor activator of nuclear factor-kappaB ligand (RANKL) mRNA and protein from bone marrow stromal cells. This report is the first demonstration of a novel biological activity of GGT protein in a manner independent of its enzymatic activity.