Osteoclasts are bone-resorbing cells derived from hematopoietic precursors of the monocyte-macrophage lineage. Regulation of osteoclast function is central to the understanding of bone diseases such as osteoporosis, rheumatoid arthritis and osteopetrosis. Although peroxisome proliferator-activated receptor-gamma (PPAR-gamma) has been shown to inhibit osteoblast differentiation, its role, if any, in osteoclasts is unknown. This is a clinically crucial question because PPAR-gamma agonists, "such as thiazolidinediones-" a class of insulin-sensitizing drugs, have been reported to cause a higher rate of fractures in human patients. Here we have uncovered a pro-osteoclastogenic effect of PPAR-gamma by using a Tie2Cre/flox mouse model in which PPAR-gamma is deleted in osteoclasts but not in osteoblasts. These mice develop osteopetrosis characterized by increased bone mass, reduced medullary cavity space and extramedullary hematopoiesis in the spleen. These defects are the result of impaired osteoclast differentiation and compromised receptor activator of nuclear factor-kappaB ligand signaling and can be rescued by bone marrow transplantation. Moreover, ligand activation of PPAR-gamma by rosiglitazone exacerbates osteoclast differentiation in a receptor-dependent manner. Our examination of the underlying mechanisms suggested that PPAR-gamma functions as a direct regulator of c-fos expression, an essential mediator of osteoclastogenesis. Therefore, PPAR-gamma and its ligands have a previously unrecognized role in promoting osteoclast differentiation and bone resorption.