Osteoclasts, the multinucleated cells that resorb bone, develop from hematopoietic cells of monocyte/macrophage lineage. Osteoclast-like cells (OCLs) are formed by coculturing spleen cells with osteoblasts or bone marrow stromal cells in the presence of bone-resorbing factors. The cell-to-cell interaction between osteoblasts/stromal cells and osteoclast progenitors is essential for OCL formation. Recently, we purified and molecularly cloned osteoclastogenesis-inhibitory factor (OCIF), which was identical to osteoprotegerin (OPG). OPG/OCIF is a secreted member of the tumor necrosis factor receptor family and inhibits osteoclastogenesis by interrupting the cell-to-cell interaction. Here we report the expression cloning of a ligand for OPG/OCIF from a complementary DNA library of mouse stromal cells. The protein was found to be a member of the membrane-associated tumor necrosis factor ligand family and induced OCL formation from osteoclast progenitors. A genetically engineered soluble form containing the extracellular domain of the protein induced OCL formation from spleen cells in the absence of osteoblasts/stromal cells. OPG/OCIF abolished the OCL formation induced by the protein. Expression of its gene in osteoblasts/stromal cells was up-regulated by bone-resorbing factors. We conclude that the membrane-bound protein is osteoclast differentiation factor (ODF), a long-sought ligand mediating an essential signal to osteoclast progenitors for their differentiation into osteoclasts. ODF was found to be identical to TRANCE/RANKL, which enhances T-cell growth and dendritic-cell function. ODF seems to be an important regulator in not only osteoclastogenesis but also immune system.