Missense mutations that reduce or abrogate myeloid cell expression of the F-BAR domain protein, proline serine threonine phosphatase-interacting protein 2 (PSTPIP2), lead to autoinflammatory disease involving extramedullary hematopoiesis, skin and bone lesions. However, little is known about how PSTPIP2 regulates osteoclast development. Here we examined how PSTPIP2 deficiency causes osteopenia and bone lesions, using the mouse PSTPIP2 mutations, cmo, which fails to express PSTPIP2 and Lupo, in which PSTPIP2 is dysfunctional. In both models, serum levels of the pro-osteoclastogenic factor, MIP-1α, were elevated and CSF-1 receptor (CSF-1R)–dependent production of MIP-1α by macrophages was increased. Treatment of cmo mice with a dual specificity CSF-1R and c-Kit inhibitor, PLX3397, decreased circulating MIP-1α and ameliorated the extramedullary hematopoiesis, inflammation, and osteopenia, demonstrating that aberrant myelopoiesis drives disease. Purified osteoclast precursors from PSTPIP2-deficient mice exhibit increased osteoclastogenesis in vitro and were used to probe the structural requirements for PSTPIP2 suppression of osteoclast development. PSTPIP2 tyrosine phosphorylation and a functional F-BAR domain were essential for PSTPIP2 inhibition of TRAP expression and osteoclast precursor fusion, whereas interaction with PEST-type phosphatases was only required for suppression of TRAP expression. Thus, PSTPIP2 acts as a negative feedback regulator of CSF-1R signaling to suppress inflammation and osteoclastogenesis.