The plasma cell (PC) malignancy, multiple myeloma (MM), is unique among hematological malignancies in its capacity to cause osteoclast (OC)-mediated skeletal destruction. We have previously shown that elevated plasma levels of PC-derived CXCL12 are associated with presence of X-ray detectable osteolytic lesions in MM patients. To further investigate this relationship, plasma levels of CXCL12 and betaCrossLaps, a marker of bone loss, were measured. A strong correlation between levels of CXCL12 and OC-mediated bone resorption was identified. To confirm the OC-activating potential of MM PC-derived CXCL12 in vivo, we established a model of MM-mediated focal osteolysis, wherein MM PC lines, such as RPMI-8226, were injected into the tibias of nude mice. Implanting RPMI-8226 gave rise to osteolytic lesions proximal to the tumor, resulting in a 5% decrease in bone volume (BV) compared with vehicle control. Importantly, bone loss was significantly inhibited with systemic administration of the CXCL12/CXCR4 antagonist T140. Furthermore, implanting CXCL12-overexpressing RPMI-8226 cells resulted in a 13% decrease in BV and was associated with increased OC recruitment proximal to the tumor, increased serum matrix metalloproteinase activity, and increased levels of collagen I degradation products. These findings confirm our hypothesis that MM PC-derived CXCL12 stimulates the recruitment and activity of OC, thereby contributing to the formation of MM osteolytic lesions.