Although the osteoclast shares several features with other cells of the mononuclear phagocyte system (MPS), its precise cellular ontogeny is unknown, and its membership of the MPS is controversial. This study examined whether various cells of the MPS can be induced to differentiate into cells capable of the highly specialized osteoclastic function of lacunar bone resorption. We isolated mouse and rat monocytes, mouse (liver, peritoneal, alveolar, brain) tissue macrophages, and spleen and marrow haemopoietic cells, as well as foreign body macrophages and macrophage polykaryons derived from subcutaneous granulomas formed by implantation of latex beads and coverslips in mice. When these cells were incubated with UMR106 osteoblast-like cells on glass coverslips and human cortical bone slices in the presence of 1,25-dihydroxy vitamin D3 [1,25(OH)2D3] for 7 and 14 days, numerous tartrate-resistant acid phosphatase-positive cells formed in these co-cultures and scanning electron microscopy revealed extensive lacunar resorption of the bone surface. Bone resorption was seen as early as 4 days after monocytes were co-cultured with UMR106 cells. With the exception of bone marrow-derived cells, lacunar resorption was not seen in the absence of UMR106 cells. These findings show that a bone-derived stromal cell element is necessary for differentiation of monocytes and tissue and inflammatory macrophages into osteoclast-like cells capable of extensive lacunar bone resorption, and would argue in favour of osteoclast membership of the MPS.