TNF-α plays a key role in the development of rheumatoid arthritis (RA) and inflammatory bone loss. Unfortunately, treatment of RA with anti-inflammatory glucocorticoids (GCs) also causes bone loss resulting in osteoporosis. Our previous studies showed that overexpression of glucocorticoid-induced leucine zipper (GILZ), a mediator of GC's anti-inflammatory effect, can enhance osteogenic differentiation in vitro and bone acquisition in vivo. To investigate whether GILZ could antagonize TNF-α-induced arthritic inflammation and protect bone in mice, we generated a TNF-α-GILZ double transgenic mouse line (TNF-GILZ Tg) by crossbreeding a TNF-α Tg mouse, which ubiquitously expresses human TNF-α, with a GILZ Tg mouse, which expresses mouse GILZ under the control of a 3.6kb rat type I collagen promoter fragment. Results showed that overexpression of GILZ in bone marrow mesenchymal stem/progenitor cells protected mice from TNF-α-induced inflammatory bone loss and improved bone integrity (TNF-GILZ double Tg vs. TNF-αTg, n = 12-15). However, mesenchymal cell lineage restricted GILZ expression had limited effects on TNF-α-induced arthritic inflammation as indicated by clinical scores and serum levels of inflammatory cytokines and chemokines.