Rapid progress has been made in recent years in our understanding of the mechanisms regulating the formation, activation, and survival of osteoclasts, which are derived from precursor cells in the myeloid lineage. In contrast, study of the regulation of osteoclast precursors (OCPs) has been relatively slow, in part because it has been hard to accurately identify them. However, following the discovery of cell-surface markers that facilitated purification of OCPs, recent studies have demonstrated that peripheral blood OCP numbers are increased in tumor necrosis factor (TNF)-mediated arthritis, both in animals and humans, and these numbers correlate with serum TNF levels. The increase can be reversed by anti-TNF therapy. Furthermore, the precursor cells that give rise to osteoclasts can also differentiate into other cell types, including dendritic cells. Receptor activator nuclear factor-kappaB ligand (RANKL) stimulates OCPs to produce pro-inflammatory cytokines and chemokines, and RANKL blockade prevents joint inflammation in a murine model of inflammatory arthritis. These findings suggest that OCPs may serve as a source for both osteoclasts and other effector cells and participate actively in the pathogenesis of diseases. Here, we review our current understanding of the regulation of OCP formation and differentiation and provide a model of a vicious cycle in which pro-inflammatory cytokines produced in inflamed joints feedback on the bone marrow to promote the generation and release of OCPs. The OCPs then home to the inflamed joints to differentiate into mature osteoclasts or to produce more inflammatory factors in the presence of RANKL. Disruption of this cycle could provide a new strategy for the development of drugs to treat inflammatory arthritis and other disorders associated with elevated OCP/myeloid progenitors.