Osteoclasts are the cells that resorb bone. It is generally presumed, on the basis of indirect experiments, that they are derived from the hemopoietic stem cell. However, this origin has never been established. We have developed an assay for osteoclastic differentiation in which bone marrow cells are incubated in liquid culture on slices of cortical bone. The bone slices are inspected in the scanning electron microscope after incubation for the presence of excavations, which are characteristic of osteoclastic activity. We have now incubated bone marrow cells at low density, or a factor-dependent mouse hemopoietic cell line (FDCP-mix A4) with 1,25 dihydroxyvitamin D3 (a hormone which we have previously found induces osteoclastic differentiation) with and without murine bone marrow stro-ma1 cells, or with and without 3T3 cells, on bone slices. Neither the bone marrow cells nor the bone marrow stromal cells alone developed osteoclastic function even in the presence of 1,25 dihydroxyvitamin D3. However, extensive excavation of the bone surface was observed, only in the presence of 1,25 dihydroxyvitamin D3, on bone slices on which bone marrow stromal cells were cocultured with low-density bone marrow cells or the hemopoietic cell line. Similar results were obtained when the bone marrow stromal cells were killed by glutaraldehyde fixation; 3T3 cells were unable to substitute for stromal cells. These results are strong evidence that osteoclasts derive from the hemopoietic stem cell and suggest that although mature osteoclasts possess neither receptors for nor responsiveness to 1,25 dihydroxyvitamin D3, the hormone induces osteoclastic function through a direct effect on hemopoietic cells rather than through some accessory cell in the bone marrow stroma. The failure of 3T3 cells, which enable differentiation of other hemopoietic progeny from this cell line, to induce osteoclastic differentiation suggests that bone marrow stroma possesses additional characteristics distinct from those that induce differentiation of other hemopoietic cells that are specifically required for osteoclastic differentiation.