Osteoclasts are derived from mononuclear hematopoietic myeloid lineage cells, which are formed in the bone marrow and are attracted to the bloodstream by factors, including sphingsine-1 phosphate. These circulating precursors are attracted to bone surfaces undergoing resorption by chemokines and other factors expressed at these sites, where they fuse to form multinucleated bone-resorbing cells. All aspects of osteoclast formation and functions are regulated by macrophage-colony-stimulating factor (M-CSF) and receptor activator of NF-κB ligand (RANKL), cytokines essential for osteoclast formation and expressed by a variety of cell types, including osteoblast lineage cells. Since the discovery of RANKL in the mid-1990s, mouse genetic and molecular studies have revealed numerous signaling pathways activated by RANKL and M-CSF. More recent studies indicate that osteoclasts and their precursors regulate immune responses and osteoblast formation and functions by means of direct cell-cell contact through ligands and receptors, such as ephrins and Ephs, and semaphorins and plexins, and through expression of clastokines. There is also growing recognition that osteoclasts are immune cells with roles in immune responses beyond mediating the bone destruction that can accompany them. This article reviews recent advances in the understanding of the molecular mechanisms regulating osteoclast formation and functions and their interactions with other cells in normal and pathologic states.