Osteoclasts are bone-resorbing cells that play a pivotal role in bone remodeling. Osteoclasts form large multinuclear giant cells by fusion of mononuclear osteoclasts. How cell fusion is mediated, however, is unclear. We identify the dendritic cell–specific transmembrane protein (DC-STAMP), a putative seven-transmembrane protein, by a DNA subtraction screen between multinuclear osteoclasts and mononuclear macrophages. DC-STAMP is highly expressed in osteoclasts but not in macrophages. DC-STAMP–deficient mice were generated, and osteoclast cell fusion was completely abrogated in homozygotes despite normal expression of osteoclast markers and cytoskeletal structure. As osteoclast multinucleation was restored by retroviral introduction of DC-STAMP, loss of cell fusion was directly attributable to a lack of DC-STAMP. Defects in osteoclast multinucleation reduce bone-resorbing activity, leading to osteopetrosis. Similar to osteoclasts, foreign body giant cell formation by macrophage cell fusion was also completely abrogated in DC-STAMP–deficient mice. We have thus identified an essential regulator of osteoclast and macrophage cell fusion, DC-STAMP, and an essential role of osteoclast multinucleation in bone homeostasis.