We have reported that osteoclast differentiation factor (ODF) expressed on the plasma membrane of osteoblasts/stromal cells is a ligand for osteoclastogenesis inhibitory factor (OCIF). A genetically engineered soluble form of ODF (sODF) induced osteoclast-like multinucleated cells (OCLs) in the presence of M-CSF in mouse spleen cell cultures. Osteoblasts/stromal cells were not required in this process. To elucidate the mechanism of human osteoclastogenesis, human peripheral blood mononuclear cells (PBMCs) were cultured for 7 days with sODF and human M-CSF in the presence or absence of dexamethasone. Treatment of human PBMCs with sODF together with M-CSF induced OCLs, which expressed tartrate-resistant acid phosphatase and vitronectin receptors, produced cAMP in response to calcitonin, and formed resorption pits on dentine slices. OCLs were also formed from the adherent cell population of human PBMCs. Dexamethasone was required for human OCL formation in culture of whole PBMCs but not in culture of the adherent cell population. OCL formation was strongly inhibited by OCIF simultaneously added. These results clearly indicate that like in mouse osteoclastogenesis, ODF is a critical factor for human osteoclastogenesis. The present study also indicates that OCIF acts as a naturally occurring decoy receptor for ODF in inhibiting signal transduction in human osteoclast formation.