Osteoclasts are specialized macrophages that resorb bone. Mice lacking the AP-1 component c-Fos are osteopetrotic because of a lack of osteoclast differentiation and show an increased number of macrophages. The nature of the critical function of c-Fos in osteoclast differentiation is not known. Microarray analysis revealed that Nfatc1, another key regulator of osteoclastogenesis, was down-regulated in Fos(-/-) osteoclast precursors. Chromatin immunoprecipitation assay showed that c-Fos bound to the Nfatc1 and Acp5 promoters in osteoclasts. In vitro promoter analyses identified nuclear factor of activated T-cells (NFAT)/AP-1 sites in the osteoclast-specific Acp5 and Calcr promoters. Moreover, in Fos(-/-) precursors gene transfer of an active form of NFAT restored transcription of osteoclast-specific genes in the presence of receptor activator of the NF-kappaB ligand (RANKL), rescuing bone resorption. In the absence of RANKL, however, Fos(-/-) precursors were insensitive to NFAT-induced osteoclastogenesis unlike wild-type precursors. These data indicate that lack of Nfatc1 expression is the cause of the differentiation block in Fos(-/-) osteoclast precursors and that transcriptional induction of Nfatc1 is a major function of c-Fos in osteoclast differentiation.