We have established by differential display polymerase chain reaction of mRNA that interleukin (IL)-18 is expressed by osteoblastic stroma cells. The stromal cell populations used for comparison differed in their ability to promote osteoclast-like multinucleated cell (OCL) formation. mRNA for IL-18 was found to be expressed in greater abundance in lines that were unable to support OCL formation than in supportive cells. Recombinant IL-18 was found to inhibit OCL formation in cocultures of osteoblasts and hemopoietic cells of spleen or bone marrow origin. IL-18 inhibited OCL formation in the presence of osteoclastogenic agents including, 1α, 25-dihydroxyvitamin D3, prostaglandin E2, parathyroid hormone, IL-1, and IL-11. The inhibitory effect of IL-18 was limited to the early phase of the cocultures, which coincides with proliferation of hemopoietic precursors. IL-18 has been reported to induce interferon-γ (IFN-γ) and granulocyte/macrophage colony- stimulating factor (GM-CSF) production in T cells, and both agents also inhibit OCL formation in vitro. Neutralizing antibodies to GM-CSF were able to rescue IL-18 inhibition of OCL formation, whereas neutralizing antibodies to IFN-γ did not. It cocultures with osteoblasts and spleen cells from IFN- γ receptor type II-deficient mice, IL-18 was found to inhibit OCL formation, indicating that IL-18 acted independently of IFN-γ production; IFN-γ had no effect in these cocultures. Additionally, in cocultures in which spleen cells were derived from receptor-deficient mice and osteoblasts were from wild- type mice and vice versa, we identified that the target cells for IFN-γ inhibition of OCL formation were the hemepoietic cells. The work provides evidence that IL-18 is expressed by osteoblasts and inhibits OCL formation via GM-CSF production and not via IFN-γ production.