The effects of cystatin C and other cysteine proteinase inhibitors on osteoclast formation and differentiation have been investigated. Cystatin C decreased osteoclast formation stimulated by parathyroid hormone (PTH), 1,25(OH)₂-vitamin D3 or interleukin-6 (IL-6) (in the presence of its soluble receptor) as assessed by the number of tartrate-resistant acid phosphatase (TRAP⁺) multinucleated cells in mouse bone marrow cultures. The inhibitory effect was associated with decreased mRNA expression for the calcitonin receptor as well as decreased number of specific binding sites for ¹²⁵I-calcitonin, and without any effect on the mRNA expression of receptor activator of nuclear factor κB (NF-κB) ligand (RANKL). Similarly, the cysteine proteinase inhibitors leupeptin, E-64 and benzyloxycarbonyl-Phe-Ala-diazomethane (Z-FA-CHN₂) decreased PTH-stimulated formation of TRAP⁺ multinucleated cells and binding of ¹²⁵I-calcitonin. A peptidyl derivative synthesized to mimic part of the proteinase-binding site of cystatin C (benzyloxycarbonyl-Arg-Leu-Val-Gly-diazomethane, or Z-RLVG-CHN₂) also decreased PTH-stimulated osteoclast formation. In a 9-day culture, addition of cystatin C during the last 5 days was sufficient to cause substantial inhibition of osteoclast formation. Cystatin C-induced decrease of osteoclast formation was associated with enhanced number of F4/80-positive macrophages and increased mRNA expression of the macrophage receptor c-fms in the bone marrow culture. Osteoclast formation in mouse bone marrow cultures as well as in mouse spleen cell cultures, stimulated by macrophage colony-stimulating factor (M-CSF) and RANKL was also decreased by different cysteine proteinase inhibitors. In addition, cystatin C inhibited M-CSF/RANKL induction of calcitonin receptor mRNA in spleen cell cultures. The inhibitory effect by cystatin C in spleen cells was associated with decreased mRNA expression of RANK and the transcription factor NFAT2. It is concluded that cysteine proteinase inhibitors decrease formation of osteoclasts by interfering at a late stage of pre-osteoclast differentiation.