Supernatants from cultures of activated normal human peripheral blood leukocytes contain a factor which stimulates osteoclastic bone resorption in vitro. The present study indicates that osteoclast activating factor (OAF) is produced by phytohemagglutinin-activated mononuclear cells within 6 hr of activation, and that peak production is associated with increased amino acid incorporation into protein but precedes increased thymidine incorporation into DNA. Granulocytes, platelets, and red cells were not necessary for the production of OAF, since mononuclear cells purified on Ficoll-Hypaque gradients and devoid of these elements produced as much OAF as unseparated leukocytes. Granulocyte extracts did not show bone-resorbing activity. The production of OAF by mononuclear cells was impaired by irradiation, suggesting that it is made by radiosensitive lymphocytes rather than radioresistant macrophages. However, OAF was not produced by lymphocytes purified on glass-bead columns although these cells could respond to phytohemagglutinin with increased thymidine and amino acid incorporation. Purified macrophages also failed to produce substantial bone-resorbing activity. However, when a small number of irradiated but viable macrophages (5 × 104 cells/ml) was added to glass bead-purified lymphocytes (2 × 106 cells/ml), OAF production was as great as with unseparated mononuclear cell populations. These results suggest that OAF is produced by lymphocytes, but that its production is dependent on macrophage-lymphocyte interaction. OAF is a unique bone-resorbing factor which may play an important role in bone lesions associated with chronic inflammation and neoplasia. The cellular mechanisms for its production participate in the pathogenesis of these disorders.