Osteoclasts, multinucleated cells of myeloid-monocytic origin, are responsible for bone resorption, which is crucial for maintenance of bone homeostasis in concert with bone-forming osteoblasts of nonhematopoietic, mesenchymal origin. Receptor activator of NF-kappaB ligand (RANKL) and M-CSF, expressed on the surface of and secreted by osteoblasts, respectively, are essential factors that facilitate osteoclast formation. In contrast to the activation processes for osteoclast formation, inhibitory mechanisms for it are poorly understood. Herein we demonstrate that inhibitory Ig-like receptors recruiting Src homology 2 domain-containing tyrosine phosphatase 1 (SHP-1) are expressed on osteoclast precursor cells like other myeloid cells, and that they play a regulatory role in the development of osteoclasts. We detected cell-surface expression of paired Ig-like receptor (PIR)-B and four isoforms of leukocyte Ig-like receptor (LILR)B on cultured osteoclast precursor cells of mouse and human origin, respectively, and showed that all of these ITIM-harboring inhibitory receptors constitutively recruit SHP-1 in the presence of RANKL and M-CSF, and that some of them can suppress osteoclast development in vitro. Fluorescence energy transfer analyses have suggested that the constitutive binding of either murine PIR-B or its human ortholog LILRB1 to MHC class I molecules on the same cell surface comprises one of the mechanisms for developmental regulation. These results constitute the first evidence of the regulation of osteoclast formation by cell-surface, ITIM-harboring Ig-like receptors. Modulation of these regulatory receptors may be a novel way to control various skeletal system disorders and inflammatory arthritis.