The pathogenesis of glucocorticoid-induced (GC-induced) bone loss is unclear. For example, osteoblast apoptosis is enhanced by GCs in vivo, but they stimulate bone formation in vitro. This conundrum suggests that an intermediary cell transmits a component of the bone-suppressive effects of GCs to osteoblasts in the intact animal. Bone remodeling is characterized by tethering of the activities of osteoclasts and osteoblasts. Hence, the osteoclast is a potential modulator of the effect of GCs on osteoblasts. To define the direct impact of GCs on bone-resorptive cells, we compared the effects of dexamethasone (DEX) on WT osteoclasts with those derived from mice with disruption of the GC receptor in osteoclast lineage cells (GRoc-/- mice). While the steroid prolonged longevity of osteoclasts, their bone-degrading capacity was suppressed. The inhibitory effect of DEX on bone resorption reflects failure of osteoclasts to organize their cytoskeleton in response to M-CSF. DEX specifically arrested M-CSF activation of RhoA, Rac, and Vav3, each of which regulate the osteoclast cytoskeleton. In all circumstances GRoc-/- mice were spared the impact of DEX on osteoclasts and their precursors. Consistent with osteoclasts modulating the osteoblast-suppressive effect of DEX, GRoc-/- mice are protected from the steroid's inhibition of bone formation.