Excessive bone loss in arthritic diseases is mostly due to abnormal activation of the immune system leading to stimulation of osteoclasts. While phospholipase Cgamma (PLCgamma) isoforms are known modulators of T and B lymphocyte-mediated immune responses, we found that blockade of PLCgamma enzymatic activity also blocks early osteoclast development and function. Importantly, targeted deletion of Plcg2 in mice led to an osteopetrotic phenotype. PLCgamma2, independent of PLCgamma1, was required for receptor activator of NF-kappaB ligand-induced (RANKL-induced) osteoclastogenesis by differentially regulating nuclear factor of activated T cells c1 (NFATc1), activator protein-1 (AP1), and NF-kappaB. Specifically, we show that NFATc1 upregulation is dependent on RANKL-mediated phosphorylation of PLCgamma2 downstream of Dap12/Fc receptor gamma (Dap12/FcRgamma) receptors and is blocked by the PLCgamma inhibitor U73122. In contrast, activation of JNK and NF-kappaB was not affected by U73122 or Dap12/FcRgamma deletion. Interestingly, we found that in osteoclasts, PLCgamma2 formed a complex with the regulatory adapter molecule GAB2, was required for GAB2 phosphorylation, and modulated GAB2 recruitment to RANK. Thus, PLCgamma2 mediates RANKL-induced osteoclastogenesis and is a potential candidate for antiresorptive therapy.