Osteolysis is a common complication of tumors that arise in, or metastasize to, bone. The recent discovery of key regulators of osteoclast formation and activity, including receptor activator of nuclear factor of κB ligand (RANKL), RANK, and osteoprotegerin (OPG), may facilitate new treatment regimes for certain tumors associated with excessive bone loss. We recently showed that the stromal cells of osteolytic giant cell tumors (GCT) of bone express high levels of mRNA encoding RANKL, relative to mRNA for the RANKL antagonist, OPG, compared with the expression patterns of other lytic and nonlytic bone tumors. In this study, we found that expression of RANKL and OPG mRNA continued by the stromal element of these tumors in a constitutive manner for at least 9 days in the absence of giant cells. Immunostaining of unfractionated GCT cultured in vitro revealed punctate cytoplasmic/membranous staining for RANKL and both cytoplasmic and extracellular matrix staining for OPG in stromal cells. Giant cells (osteoclasts) were negative for RANKL staining, but stained brightly for cytoplasmic OPG protein. We also investigated the functional relevance of these molecules for GCT osteolysis by adding recombinant OPG and RANKL to cultured GCT cells. We found that OPG treatment potently and dose-dependently inhibited resorption of bone slices by GCT, and could also inhibit the formation of multinucleated osteoclasts from precursors within the GCT. These effects of OPG were reversed by stoichiometric concentrations of exogenous RANKL. These data indicate that both the processes of osteoclast formation and activation in GCT are promoted by RANKL. Therefore, GCT represent a paradigm for the direct stimulation of osteoclast formation and activity by tumor stromal cells, in contrast to the mechanisms described for osteolytic breast tumors and multiple myeloma. The demonstration of these relationships is important in developing approaches to limit tumor-induced osteolysis.