Cytokine signaling via various transcription factors regulates receptor activator of nuclear factor (NF)-kappaB ligand (RANKL)-mediated osteoclast differentiation from monocyte/macrophage lineage cells involved in propagation and resolution of inflammatory bone destruction. Protein inhibitor of activated STAT3 (PIAS3) was initially identified as a molecule that inhibits DNA binding of STAT3 and regulates many transcription factors through distinct mechanisms. To analyze PIAS3 function in osteoclasts in vivo, we have generated transgenic mice in which PIAS3 is specifically expressed in the osteoclast lineage using the tartrate-resistant acid phosphatase (TRAP) gene promoter. PIAS3 transgenic mice showed an osteopetrotic phenotype due to impairment of osteoclast differentiation. Overexpression of PIAS3 in RAW264.7 cells suppressed RANKL-induced osteoclastogenesis by inhibiting the expression of c-Fos and NFATc1. Interestingly, PIAS3 inhibits the transcriptional activity of microphthalmia-associated transcription factor (MITF) independent of sumoylation. Down-regulation of PIAS3 markedly enhances RANKL-mediated osteoclastogenesis in RAW264.7 cells. Furthermore, overexpression of PIAS3 in mouse primary osteoblast (POB), down-regulates RANKL expression induced by interleukin-6 (IL-6) cytokine family, and inhibits osteoclast formation from bone marrow macrophages (BMMs) in vitro coculture system. Down-regulation of PIAS3 leads to the accelerated expression of RANKL in POB stimulated with IL-6 and soluble IL-6 receptor (sIL-6R). Taken together, our results clearly indicate that PIAS3 negatively regulates RANKL-mediated osteoclastogenesis directly in osteoclast precursors and indirectly via osteoblasts.