Osteoclasts are hematopoietic cells essential for bone resorption. To understand the process of osteoclastogenesis, we have developed a culture system that employs a stromal cell line, in which differentiation of osteoclasts from single embryonic stem (ES) cells occurs. This culture, which did not require any cell passaging or other manipulations, enabled us to investigate the temporal and spatial localization of the osteoclast lineage in the colonies formed from ES cells. Cells expressing tartrate-resistant acid phosphatase, a specific marker of the osteoclast lineage, were first detected on day 8, and subsequently became localized at the periphery of colonies and matured into multinucleated cells to resorb bone. Addition of macrophage colony-stimulating factor and osteoprotegerin-ligand, which are produced by stromal cells, promoted osteoclastogenesis in whole colonies, indicating that the location and maintenance of mature osteoclasts as well as the growth and differentiation of osteoclast precursors are regulated by these two factors.