TREM-2 is an immunoglobulin-like cell surface receptor associated with DAP12/KARAP that activates monocyte-derived dendritic cells (DCs) in vitro. Recently, it has been shown that genetic defects of human DAP12/KARAP and TREM-2 result in a rare syndrome characterized by bone cysts and presenile dementia called Nasu-Hakola disease. This observation suggests that TREM-2 may function in myeloid cells other than DCs, most probably osteoclasts (OCs) and microglial cells, which are involved in bone modeling and brain function. Consistent with this prediction, here we show that OC differentiation is dramatically arrested in TREM-2–deficient patients, resulting in large aggregates of immature OCs that exhibit impaired bone resorptive activity. These results demonstrate a critical role for TREM-2 in the differentiation of mononuclear myeloid precursors into functional multinucleated OCs.