The hematopoietic-restricted protein Src homology 2-containing inositol-5-phosphatase (SHIP) blunts phosphatidylinositol-3-kinase-initiated signaling by dephosphorylating its major substrate, phosphatidylinositol-3,4,5-trisphosphate. As SHIP(-/-) mice contain increased numbers of osteoclast precursors, that is, macrophages, we examined bones from these animals and found that osteoclast number is increased two-fold. This increased number is due to the prolonged life span of these cells and to hypersensitivity of precursors to macrophage colony-stimulating factor (M-CSF) and receptor activator of nuclear factor-kappa B ligand (RANKL). Similar to pagetic osteoclasts, SHIP(-/-) osteoclasts are enlarged, containing upwards of 100 nuclei, and exhibit enhanced resorptive activity. Moreover, as in Paget disease, serum levels of interleukin-6 are markedly increased in SHIP(-/-) mice. Consistent with accelerated resorptive activity, 3D trabecular volume fraction, trabecular thickness, number and connectivity density of SHIP(-/-) long bones are reduced, resulting in a 22% loss of bone-mineral density and a 49% decrease in fracture energy. Thus, SHIP negatively regulates osteoclast formation and function and the absence of this enzyme results in severe osteoporosis.