Psoriatic arthritis (PsA) is an inflammatory joint disease characterized by extensive bone resorption. The mechanisms underlying this matrix loss have not been elucidated. We report here that blood samples from PsA patients, particularly those with bone erosions visible on plain radiographs, exhibit a marked increase in osteoclast precursors (OCPs) compared with those from healthy controls. Moreover, PsA PBMCs readily formed osteoclasts in vitro without exogenous receptor activator of NF-kappaB ligand (RANKL) or MCSF. Both osteoprotegerin (OPG) and anti-TNF antibodies inhibited osteoclast formation. Additionally, cultured PsA PBMCs spontaneously secreted higher levels of TNF-alpha than did healthy controls. In vivo, OCP frequency declined substantially in PsA patients following treatment with anti-TNF agents. Immunohistochemical analysis of subchondral bone and synovium revealed RANK-positive perivascular mononuclear cells and osteoclasts in PsA specimens. RANKL expression was dramatically upregulated in the synovial lining layer, while OPG immunostaining was restricted to the endothelium. These results suggest a model for understanding the pathogenesis of aggressive bone erosions in PsA. OCPs arise from TNF-alpha-activated PBMCs that migrate to the inflamed synovium and subchondral bone, where they are exposed to unopposed RANKL and TNF-alpha. This leads to osteoclastogenesis at the erosion front and in subchondral bone, resulting in a bidirectional assault on psoriatic bone.