It was recently found that osteoblastic cells express TRANCE (tumor necrosis factor-related activation-induced cytokine), a newly identified member of the tumor necrosis factor superfamily, and that expression was increased by calciotropic hormones. Furthermore, soluble recombinant TRANCE induces osteoclast formation and resorption in stroma-free populations of hemopoietic precursor cells. However, overexpression of the decoy receptor osteoprotegerin in vivo shows that there are substantial differences in the sensitivity of different sites to resorption-inhibition, suggesting that either alternative ligands exist or the sensitivity of osteoclasts to TRANCE can be modified by cofactors. We therefore tested the possibility that cofactors might enhance osteoclast formation by TRANCE. We found that the number of tartrate-resistant acid phosphatase-positive and calcitonin receptor-positive cells was increased by a factor of 10 by the presence of PGE₂ in the absence of stromal cells. Moreover, although the tartrate-resistant acid phosphatase-positive cells that formed in TRANCE alone were typically mononuclear and poorly spread, the addition of PGE₂ induced the formation of large, well spread multinuclear cells. There was an increase in bone resorption that corresponded with the increase in osteoclast number. PGE₂ did not synergize with TRANCE for resorption-stimulation in mature cells. 8-Bromo-cAMP showed a similar syngergistic effect on osteoclastic differentiation. Thus, PGE₂ appears to stimulate bone resorption through a direct effect on hemopoietic precursors, primarily through a synergistic effect on the ability of TRANCE to induce osteoclastic differentiation.