The cytokines RANKL and TNF activate NF-κB signaling in osteoclast precursors (OCPs) to induce osteoclast (OC) formation. Conversely, TNF can limit OC formation through NF-κB p100, which acts as an inhibitor, and TNF receptor–associated receptor 3 (TRAF3); however, a role for TRAF3 in RANKL-mediated OC formation is unknown. We found that TRAF3 limits RANKL-induced osteoclastogenesis by suppressing canonical and noncanonical NF-κB signaling. Conditional OC-specific Traf3-KO (cKO) mice had mild osteoporosis and increased OC formation. RANKL induced TRAF3 degradation via the lysosome/autophagy system. The autophagy/lysosome inhibitor chloroquine reduced RANKL-induced OC formation and function by increasing TRAF3 expression in OCPs in vitro and in vivo. Although chloroquine had no effect on basal bone resorption, it inhibited parathyroid hormone– and ovariectomy-induced OC activation in WT, but not cKO, mice. Deletion of the transcription factor gene Relb resulted in increased TRAF3 expression in OCPs, which was associated with decreased RANKL-induced TRAF3 degradation. RelB directly increased expression of BECN1, a key autophagy regulator, by binding to its promoter. These data indicate that autophagic/lysosomal degradation of TRAF3 is an important step in RANKL-induced NF-κB activation in OCPs. Furthermore, treatments that increase TRAF3 levels in OCPs, including pharmacological inhibition of its degradation with compounds such as chloroquine, may limit bone destruction in common bone diseases.