We have evaluated the role of the ADP-ribosyl cyclase, CD38, in bone remodeling, a process by which the skeleton is being renewed constantly through the coordinated activity of osteoclasts and osteoblasts. CD38 catalyzes the cyclization of its substrate, NAD+, to the Ca2+-releasing second messenger, cyclic ADP-ribose (cADPr). We have shown previously that CD38 is expressed both in osteoblasts and osteoclasts. Its activation in the osteoclast triggers Ca2+ release through ryanodine receptors (RyRs), stimulation of interleukin-6 (IL-6), and an inhibition of bone resorption. Here, we have examined the consequences of deleting the CD38 gene in mice on skeletal remodeling. We report that CD38-/- mice displayed a markedly reduced bone mineral density (BMD) at the femur, tibia, and lumbar spine at 3 months and at the lumbar spine at 4 months, with full normalization of the BMD at all sites at 5 months. The osteoporosis at 3 months was accompanied by a reduction in primary spongiosa and increased osteoclast surfaces on histomorphometric analysis. Hematopoetic stem cells isolated ex vivo from CD38-/- mice showed a dramatic-fourfold increase in osteoclast formation in response to incubation for 6 days with RANK-L and M-CSF. The osteoclasts so formed in these cultures showed a ∼2.5-fold increase in resorptive activity compared with wild-type cells. However, when adherent bone marrow stromal cells were allowed to mature into alkaline phosphatase-positive colony-forming units (CFU-Fs), those derived from CD38-/- mice showed a significant reduction in differentiation compared with wild-type cells. Real-time RT-PCR on mRNA isolated from osteoclasts at day 6 showed a significant reduction in IL-6 and IL-6 receptor mRNA, together with significant decreases in the expression of all calcineurin A isoforms, α, β, and γ. These findings establish a critical role for CD38 in osteoclast formation and bone resorption. We speculate that CD38 functions as a cellular NAD+ "sensor," particularly during periods of active motility and secretion.