IL-10, originally described as a cytokine synthesis inhibitory factor produced by T cells, has recently been found to suppress osteoblastic differentiation in mouse bone marrow cultures. Since osteoblastic cells exert a major influence on the production and regulation of osteoclasts, the cells that resorb bone, this suggests that the cytokine might play a role in the regulation of bone resorption. We, therefore, tested the actions of the cytokine on osteoclast formation and function. We found no effect of IL-10 on the resorptive function of mature osteoclasts, either when isolated or when incubated in the presence of osteoblastic cells. However, IL-10 suppressed bone resorption in bone marrow cultures and in cocultures of bone marrow stromal cell lines with hemopoietic spleen cells. In both systems, suppression of bone resorption was associated with a substantial reduction in the ratio of calcitonin receptor-positive cells to macrophages, suggesting that IL-10 exerts a reciprocal action on the differentiation of osteoclasts and macrophages from their shared precursor. This reciprocal action is very similar to that associated with the addition of macrophage CSF to hemopoietic cultures, and we found that IL-10 increased the expression of mRNA for macrophage CSF in bone marrow cultures. This potent inhibition of osteoclast formation by IL-10 suggests that IL-10 might play a role in the modulation of bone loss in inflammatory disorders.