Distal-less 3 (DLX3) gene mutations are etiologic for Tricho-Dento-Osseous syndrome. To investigate the in vivo impact of mutant DLX3 on bone development, we established transgenic (TG) mice expressing the c.571_574delGGGG DLX-3 gene mutation (MT-DLX3) driven by a mouse 2.3 Col1A1 promoter. Microcomputed tomographic analyses demonstrated markedly increased trabecular bone volume and bone mineral density in femora from TG mice. In ex vivo experiments, TG mice showed enhanced differentiation of bone marrow stromal cells to osteoblasts and increased expression levels of bone formation markers. However, TG mice did not show enhanced dynamic bone formation rates in in vivo fluorochrome double labeling experiments. Osteoclastic differentiation capacities of bone marrow monocytes were reduced in TG mice in the presence of osteoclastogenic factors and the numbers of TRAP(+) osteoclasts on distal metaphyseal trabecular bone surfaces were significantly decreased. TRACP 5b and CTX serum levels were significantly decreased in TG mice, while IFN-gamma levels were significantly increased. These data demonstrate that increased levels of IFN-gamma decrease osteoclast bone resorption activities, contributing to the enhanced trabecular bone volume and mineral density in these TG mice. These data suggest a novel role for this DLX-3 mutation in osteoclast differentiation and bone resorption.