Osteoclasts are formed in cocultures of mouse calvarial cells and hematopoietic cells in the presence of osteotropic factors such as 1alpha,25-dihydroxyvitamin D3 [1alpha,25(OH)2D3], parathyroid hormone (PTH) and prostaglandin E2 (PGE2). We isolated osteoclast precursors (OCPs) from the coculture and examined their characteristics. After coculture for 7 days of mouse calvarial cells and bone marrow cells in the absence of osteotropic factors, hematopoietic cells were recovered and applied to a Sephadex G-10 column. Cells which passed through the column were collected as OCPs. When OCPs were cultured on calvarial cell layers in the presence of 1alpha,25(OH)2D3, tartrate-resistant acid phosphatase (TRAP)-positive cells first appeared within 24 h, and their number increased thereafter. OCPs also differentiated into TRAP-positive cells within 48 h on the calvarial cell layer which had been pretreated with either 1alpha,25(OH)2D3, PTH, or PGE2. Autoradiography using [125I]-labeled calcitonin showed that TRAP-positive cells formed on the calvarial cell layer expressed calcitonin receptors. Direct contact between OCPs and calvarial cells was required for the differentiation of OCPs into TRAP-positive cells. Flow cytometric analysis revealed that OCPs were positive for Mac-1, Mac-2, and Gr-1 but negative for F4/80, B220 and CD3e. Calvarial cells obtained from macrophage-colony stimulating factor (M-CSF)-deficient osteopetrotic (op/op) mice did not support OCP formation. A cell preparation disaggregated from long bones of newborn mice contained OCPs that differentiated into TRAP-positive cells on calvarial cells within 48 h, but cell preparations of freshly isolated bone marrow cells and alveolar macrophages did not. These results suggest that OCPs are specific cells which are formed only in the bone microenvironment and that OCPs recognize a signal(s) expressed by stromal cells in response to osteotropic factors and differentiate into osteoclasts.