Osteocytes are terminally differentiated cells of the osteoblast lineage that have become embedded in mineralized matrix and may send signals that regulate bone modeling and remodeling. The hypothesis to be tested in this study is that osteocytes can stimulate and support osteoclast formation and activation. To test this hypothesis, an osteocyte‐like cell line called MLO‐Y4 and primary murine osteocytes were used in coculture with spleen or marrow cells. MLO‐Y4 cells support osteoclast formation in the absence of 1,25‐dihydroxyvitamin D₃ [1,25(OD)₂D₃] or any other exogenous osteotropic factor. These cells alone stimulate osteoclast formation to the same extent or greater than adding 1,25(OH)₂D₃. Coaddition of 1,25(OH)₂D₃ with MLO‐Y4 cells synergistically increased osteoclast formation. Optimal osteoclast formation and pit formation on dentine was observed with 200–1000 MLO‐Y4 cells per 0.75‐cm² well. No osteoclast formation was observed with 2T3, OCT‐1, or MC3T3‐E1 osteoblast cells (1000 cells/well). Conditioned media from the MLO‐Y4 cells had no effect on osteoclast formation, indicating that cell contact is necessary. Serial digestions of 2‐week‐old mouse calvaria yielded populations of cells that support osteoclast formation when cocultured with 1,25(OH)2D₃ and marrow, but the population that remained in the bone particles supported the greatest number of osteoclasts with or without 1,25(OH)₂D₃. To examine the mechanism whereby these cells support osteoclast formation, the MLO‐Y4 cells were compared with a series of osteoblast and stromal cells for expression of macrophage colony‐stimulating factor (M‐CSF), RANKL, and osteoprotegerin (OPG). MLO‐Y4 cells express and secrete large amounts of M‐CSF. MLO‐Y4 cells express RANKL on their surface and their dendritic processes. The ratio of RANKL to OPG mRNA is greatest in the MLO‐Y4 cells compared with the other cell types. RANK‐Fc and OPG‐Fc blocked the formation of osteoclasts by MLO‐Y4 cells. These studies suggest that both RANKL and OPG may play a role in osteocyte signaling, OPG and M‐CSF as soluble factors and RANKL as a surface molecule that is functional in osteocytes or along their exposed dendritic processes.