Clinical studies have shown that total body fat mass is related to both bone density and fracture risk and that fat ingestion reduces bone turnover. These effects are at least partially mediated by endocrine mechanisms, but it is possible that lipids might act directly on bone. We assessed the effects of broad fractions of milk lipids in osteoblasts, bone marrow, and neonatal mouse calvariae. Several milk fractions and their hydrolysates inhibited osteoclastogenesis in bone marrow cultures, so we assessed the effects of free fatty acids in this model. Saturated fatty acids (0.1–10 μg/ml) inhibited osteoclastogenesis in bone marrow cultures and RAW264.7 cells. This effect was maximal for C14:0 to C18:0 fatty acids. The introduction of greater than 1 double bond abrogated this effect; ω3 and ω6 fatty acids had comparable low activity. Osteoblast proliferation was modestly increased by the antiosteoclastogenic compounds, ruling out a nonspecific toxic effect. Active fatty acids did not consistently change expression of receptor activator of nuclear factor-κB ligand or osteoprotegerin in osteoblastic cells nor did they affect the activity of key enzymes in the mevalonate pathway. However, receptors known to bind fatty acids were found to be expressed in osteoblastic (GPR120) and osteoclastic (GPR40, 41, 43, 120) cells. A synthetic GPR 40/120 agonist mimicked the inhibitory effects of fatty acids on osteoclastogenesis. These findings provide a novel link between lipid and bone metabolism, which might contribute to the positive relationship between adiposity and bone density as well as provide novel targets for pharmaceutical and nutriceutical development.