Estrogen deficiency in menopause is a major cause of osteoporosis in women. Estrogen acts to maintain the appropriate ratio between bone-forming osteoblasts and bone-resorbing osteoclasts in part through the induction of osteoclast apoptosis. Recent studies have suggested a role for Fas ligand (FasL) in estrogen-induced osteoclast apoptosis by an autocrine mechanism involving osteoclasts alone. In contrast, we describe a paracrine mechanism in which estrogen affects osteoclast survival through the upregulation of FasL in osteoblasts (and not osteoclasts) leading to the apoptosis of pre-osteoclasts. We have characterized a cell-type-specific hormone-inducible enhancer located 86 kb downstream of the FasL gene as the target of estrogen receptor-alpha induction of FasL expression in osteoblasts. In addition, tamoxifen and raloxifene, two selective estrogen receptor modulators that have protective effects in bone, induce apoptosis in pre-osteoclasts by the same osteoblast-dependent mechanism. These results demonstrate that estrogen protects bone by inducing a paracrine signal originating in osteoblasts leading to the death of pre-osteoclasts and offer an important new target for the prevention and treatment of osteoporosis.