Osteoclast formation is dependent on the ability of TGF-β to enable receptor activator of NF-κB ligand (RANKL)-induced commitment of hemopoietic precursors to the osteoclastic lineage. The mechanism by which TGF-β enables formation is unknown. One possibility is that TGF-β opposes Janus kinase (JAK)/STAT signals generated by inhibitory cytokines such as IFN-β. The JAK/STAT pathway is activated by cytokines that induce resistance to osteoclast formation, such as IFN-γ and M-CSF, and the effect of these is opposed by TGF-β. Recently, a group of STAT-induced factors, termed suppressors of cytokine signaling (SOCS), has been identified that inhibit JAK/STAT signals. Therefore, we tested the ability of TGF-β to induce SOCS expression in osteoclast precursors and examined the effect of SOCS expression on osteoclast/macrophage lineage commitment. We found that while SOCS mRNA is undetectable in macrophages, osteoclasts express SOCS-3, and TGF-β up-regulates this expression. Furthermore, TGF-β rapidly induces sustained SOCS-3 expression in macrophage/osteoclast precursors. To determine whether SOCS-3 plays a role in osteoclast differentiation we expressed SOCS-3 in precursors using a retroviral system. We found that osteoclast differentiation was significantly enhanced in SOCS-3-infected precursors, and SOCS-3 expression enables formation in the presence of anti-TGF-β Ab. On the other hand, antisense knockdown of SOCS-3 strongly suppressed osteoclast formation and significantly blunted the response to TGF-β. Moreover, like TGF-β, SOCS-3 expression opposed the inhibitory effect of IFN-β. These data suggest that TGF-β-induced expression of SOCS-3 may represent a mechanism by which TGF-β suppresses inhibitory cytokine signaling, priming precursors for a role in bone resorption.