Recently, receptor activator of NF-kappa B ligand (RANKL) was shown to be necessary for osteoclast formation. We now report that activin A, a cytokine enriched in bone matrix and secreted by osteoblasts and osteoclasts, powerfully synergized with RANKL for induction of osteoclast-like cells (OCL) from bone marrow precursors depleted of stromal cells. Moreover, OCL formation in RANKL was virtually abolished by soluble type II A activin receptors (ActR-II(A)), suggesting that activin A is essential for OCL formation. Activin A was most effective when precursors were exposed to RANKL and activin A simultaneously: resistance to OCL-induction that occurs when precursors are pre-incubated in M-CSF was reduced. Incubation on bone matrix also enhanced the sensitivity of precursors to OCL-induction by RANKL; and this was prevented by soluble ActR-II(A). Thus, activin A in bone matrix, or released from osteoblastic or other cells, enhances the osteoclast-forming potential of precursors and synergizes with RANKL in inducing osteoclastic differentiation,