Here, we demonstrate that the Ca(2+)/calmodulin-sensitive phosphatase calcineurin is a necessary downstream mediator for osteoclast differentiation. Using quantitative PCR, we detected the calcineurin isoforms Aalpha, Abeta, Agamma (catalytic), and B1 (regulatory) in osteoclast precursor RAW-C3 cells. We found that, although the expression of these isoforms remained relatively unchanged during osteoclast differentiation, there was a profound increase in the expression of their primary substrate for calcineurin, nuclear factor of activated T cells (NFAT)c1. For gain-of-function studies, we incubated osteoclast precursors for 10 min with a calcineurin fusion protein (TAT-calcineurin Aalpha); this resulted in its receptorless influx into >90% of the precursor cells. A marked increase in the expression of the osteoclast differentiation markers tartrate-resistant acid phosphatase (TRAP) and integrin beta(3) followed. In addition, the expression of NFATc1, as well as the alternative substrate for calcineurin, IkappaBalpha, was significantly enhanced. Likewise, transfection with constitutively active NFAT resulted in an increased expression of both TRAP and integrin beta(3). In parallel loss-of-function studies, transfection with dominant-negative NFAT not only inhibited osteoclast formation but also reversed the induction of NFATc1, TRAP, and integrin beta(3) by TAT-calcineurin Aalpha. The expression of these markers was also inhibited by calcineurin Aalpha U1 small nuclear RNA, which significantly reduced calcineurin Aalpha mRNA and protein expression. Consistent with these observations, we observed a reduction in osteoclastogenesis in calcineurin Aalpha(-/-) cells and in osteoclast precursors treated with the calcineurin inhibitors cyclosporin A and FK506. Together, the gain- and loss-of-function experiments establish that calcineurin Aalpha is necessary for osteoclast formation from its precursor and that this occurs via an NFATc1-dependent mechanism.