Central to the pathogenesis of osteoporosis is the ability of estrogen deficiency to increase osteoclast formation by enhancing stromal cell production of the osteoclastogenic cytokine macrophage colony-stimulating factor (M-CSF). We report that stromal cells from ovariectomized mice exhibit increased casein kinase II-dependent phosphorylation of the nuclear protein Egr-1. Phosphorylated Egr-1 binds less avidly to the transcriptional activator Sp-1 and the resulting higher levels of free Sp-1 stimulate transactivation of the M-CSF gene. Estrogen replacement fails to block M-CSF mRNA expression and osteoclast formation in ovariectomized mice lacking Egr-1, confirming the critical role played by this transcription factor in mediating the antiosteoclastogenic effects of estrogen. Thus, by downregulating formation of a novel Egr-1/Sp-1 complex in stromal cells, estrogen deficiency results in enhanced levels of free Sp-1 and increased M-CSF gene expression and osteoclast formation.