Hematopoietic cell-specific disruption of the STAT3 gene induces hyperproliferation of cells of the myeloid lineage. Osteoclasts (OC), the bone-resorbing cells, are generated from the same precursors as monocyte/macrophages. STAT3 mutant mice exhibit decreased bone density, bone volume, and increased numbers of TRAP-positive OC. In vitro generation of OC showed significantly greater numbers of OC in mutant mice. The increased numbers of Mac1+ cells and c-kit+ cells were detected by FACS analysis, suggesting an increased number of OC precursors. Treatment of splenocytes with CSF-1 and RANKL significantly increased the Mac-1+RANK+ cells, with much higher levels observed in cells from mutant mice compared with littermate controls. Besides enhanced number of Mac1+ OC precursors, we also identified an OC-generating Mac1- c-kit+ population in mutant mice which was absent in littermate controls. The Mac1- c-kit- cells did not generate OC. Finally, we determined that protein expression and mRNA level of c-fos, a transcription factor which is essential for OC differentiation, were enhanced in OC precursors of mutant mice, which may contribute to the osteopenic phenotype.