Here we demonstrate that the Ca²⁺/calmodulin-sensitive phosphatase calcineurin is a necessary downstream mediator for osteoclast differentiation. Using quantitative PCR (qPCR), we detected all calcineurin isoforms, namely A, A, A (catalytic) and B1 and B2 (regulatory) in osteoclast precursor RAW-C3 cells. We found that while the expression of these isoforms remained relatively unchanged during osteoclast differentiation, there was a profound increase in the expression of their primary substrate for calcineurin, NFATc1. For gain-of-function studies, we incubated osteoclast precursors for 10 minutes with a calcineurin fusion protein, TAT-calcineurin A, this resulted in its receptor-less influx into >90% of the precursor cells. A marked increase in the expression of the osteoclast differentiation markers tartrate-resistant acid phosphatase (TRAP) and integrin ₃ followed. In addition, the expression of NFATc1, as well as the alternative substrate for calcineurin, IB, was enhanced significantly. Likewise, transfection with constitutively active NFAT (NFAT^ca) resulted in an increased expression of both TRAP and ₃. In parallel loss-of-function studies, transfection with dominant-negative NFAT (NFAT^dnnot only inhibited osteoclast formation, but also reversed the induction of NFATc1, TRAP and ₃ by TAT-calcineurin A. The expression of these markers was also inhibited by calcineurin A U1 snRNA. Consistent with these observations, we also observed a reduction in osteoclastogenesis in calcineurin A^-\- cells, as well as in osteoclast precursors treated with the calcineurin inhibitors, cyclosporine A and FK506. Together the gain- and loss-of-function experiments establish that calcineurin A is necessary for osteoclast formation from its precursor, and that this occurs via an NFATc1-dependent mechanism.