Interleukin 4 (IL-4) is an immune cytokine that inhibits bone resorption in mice and suppresses osteoclastic cell formation in vitro through an undefined mechanism. In this report, we have established the cellular identity of the IL-4 target cell using a variety of bone marrow/stromal cell coculture methods. Initially, we found that the majority of IL-4's inhibition of osteoclastic cell formation was due to its effect on bone marrow cells, not stromal cells. Consequently, bone marrow macrophages were used as osteoclastic cell progenitors after they had been transiently exposed to IL-4 (48 h), before the addition of stromal cells, 1,25-dihydroxyvitamin D3, and dexamethasone. In this circumstance, IL-4 impaired subsequent osteoclastic cell formation, suggesting that the macrophage may be potentially targeted by many factors known to influence osteoclast formation. Consequently, we discovered that interferon-gamma (IFN gamma), prostaglandin E (PGE), and cell-permeant cAMP analogs also impacted osteoclastic cell formation when used to selectively treat bone marrow macrophages. IFN gamma suppressed osteoclastic cell formation, whereas PGE and cAMP analog treatment led to the formation of significantly enlarged osteoclastic cells. Importantly, PGE antagonized the inhibitory effects of both IL-4 and IFN gamma on the osteoclastic cell-forming potential of bone marrow macrophages. Collectively, these findings establish bone marrow macrophages as osteoclastic cell precursors with the degree of their commitment to the osteoclast pathway sensitive to the effects of soluble mediators, including IL-4, IFN gamma, and PGE.