Glucocorticoid (GC)-induced bone loss is the most common cause of secondary osteoporosis but its pathogenesis is controversial. GCs clearly suppress bone formation in vivo but the means by which they impact osteoblasts is unclear. Because bone remodeling is characterized by tethering of the activities of the two cells, the osteoclast is a potential modulator of the effect of GCs on osteoblasts. To address this issue we compared the effects of dexamethasone on wild-type (WT) osteoclasts with those derived from mice with disruption of the GC receptor in osteoclast lineage cells and found that the bone-degrading capacity of GC-treated WT cells is suppressed. The inhibitory effect of dexamethasone on bone resorption reflects failure of osteoclasts to organize their cytoskeleton in response to M-CSF. Dexamethasone specifically arrests M-CSF activation of RhoA, Rac, and Vav3, each of which regulate the osteoclast cytoskeleton. In all circumstances, mice lacking the GC receptor in osteoclast lineage cells are spared the impact of dexamethasone on osteoclasts and their precursors. Consistent with osteoclasts modulating the osteoblast-suppressive effect of dexamethasone, GC receptor-deficient mice are protected from the steroid's inhibition of bone formation.