The extrarenal synthesis of 1α,25 dihydroxyvitamin D₃ (1,25D) has been demonstrated in a number of cell types including osteoblasts and cells of the monocyte/macrophage lineage. The skeleton appears responsive to serum levels of the 1,25D precursor, 25 hydroxyvitamin D₃ (25D), in terms of bone mineralization parameters. The effect of metabolism of 25D into active 1,25D by osteoclast lineage cells is unknown. We found that CYP27B1 mRNA expression increased with exposure of human peripheral blood mononuclear cells (PBMCs) to macrophage colony-stimulating factor in the presence or absence of receptor activator of nuclear factor-κB ligand. Consistent with this, human osteoclast cultures incubated with 25D produced measurable quantities of 1,25D. Osteoclast formation from either mouse RAW264.7 cells or human PBMCs in the presence of physiological concentrations of 25D resulted in significant up-regulation of the key osteoclast transcription factor, nuclear factor of activated T cells-c1 in PBMCs and a number of key osteoclast marker genes in both models. The expression of the osteoblast coupling factor, ephrin-b2, was also increased in the presence of 25D. Levels of CYP27B1 and nuclear factor of activated T cells-1 mRNA correlated during osteoclastogenesis and also in a cohort of human bone samples. CYP27B1 short-hairpin RNA knockdown in RAW264.7 cells decreased their osteoclastogenic potential. 25D dose dependently reduced the resorptive capacity of PBMC-derived osteoclasts without compromising cell viability. 25D also reduced resorption by RAW264.7- and giant cell tumor-derived osteoclasts. Conversely, osteoclasts formed from vitamin D receptor-null mouse splenocytes had increased resorptive activity compared with wild-type cells. We conclude that 25D metabolism is an important intrinsic mechanism for optimizing osteoclast differentiation, ameliorating osteoclast activity, and potentially promoting the coupling of bone resorption to formation.