Bone is a dynamic tissue that depends on the intricate relationship between protein tyrosine kinases (PTK) and protein tyrosine phosphatases (PTP) for maintaining homeostasis. PTKs and PTPs act like molecular on and off switches and help modulate differentiation and the attachment of osteoclasts to bone matrix regulating bone resorption. The protein T cell ubiquitin ligand-2 (TULA-2), which is abundantly expressed in osteoclasts, is a novel histidine phosphatase. Our results show that of the two family members, only TULA-2 is expressed in osteoclasts and that its expression is sustained throughout the course of osteoclast differentiation, suggesting that TULA-2 may play a role during early as well late stages of osteoclast differentiation. Skeletal analysis of mice that do not express TULA or TULA-2 proteins (DKO mice) revealed that there was a decrease in bone volume due to increased osteoclast numbers and function. Furthermore, in vitro experiments indicated that bone marrow precursor cells from DKO mice have an increased potential to form osteoclasts. At the molecular level, the absence of TULA-2 in osteoclasts results in increased Syk phosphorylation at the Y352 and Y525/526 residues and activation of phospholipase C gamma 2 (PLCγ2) upon engagement of immune-receptor-tyrosine-based-activation-motif (ITAM)-mediated signaling. Furthermore, expression of a phosphatase-dead TULA-2 leads to increased osteoclast function. Taken together, these results suggest that TULA-2 negatively regulates osteoclast differentiation and function.