Transforming growth factor β (TGF‐β) is abundant in bone and has complex effects on osteolysis, with both positive and negative effects on osteoclast differentiation, suggesting that it acts via more than one mechanism. Osteoclastogenesis is determined primarily by osteoblast (OB) expression of the tumor necrosis factor (TNF)‐related molecule receptor activator of NF‐κB ligand (RANKL) and its decoy receptor osteoprotegerin (OPG), which are increased and decreased, respectively, by osteolytic factors. A RANKL‐independent osteoclastogenic mechanism mediated by TNF‐α has also been shown. Therefore, we investigated TGF‐β effects on osteoclast formation in culture systems in which osteoclastogenic stimulus is dependent on OBs and culture systems where it was provided by exogenously added RANKL or TNF‐α. Both OPG and TGF‐β inhibited osteoclast formation in hemopoietic cell/OB cocultures, but the kinetics of their action differed. TGF‐β also inhibited osteoclastogenesis in cocultures of cells derived from OPG null (opg^−/−) mice. TGF‐β strongly decreased RANKL messenger RNA (mRNA) expression in cultured osteoblasts, and addition of exogenous RANKL to TGFβ‐inhibited cocultures of opg^−/− cells partially restored osteoclastogenesis. Combined, these data indicate that the inhibitory actions of TGF‐β were mediated mainly by decreased OB production of RANKL. In contrast, in the absence of OBs, TGF‐β greatly increased osteoclast formation in recombinant RANKL‐ or TNF‐α‐stimulated cultures of hemopoietic cells or RAW 264.7 macrophage‐like cells to levels several‐fold greater than attainable by maximal stimulation by RANKL or TNF‐α. These data suggest that TGF‐β may increase osteoclast formation via action on osteoclast precursors. Therefore, although RANKL (or TNF‐α) is essential for osteoclast formation, factors such as TGF‐β may powerfully modify these osteoclastogenic stimuli. Such actions may be critical to the control of physiological and pathophysiological osteolysis.