Adiponectin is an adipokine playing an important role in regulating energy homeostasis and insulin sensitivity. However, the effect of adiponectin on bone metabolism shows contradictory results according to different research studies. In this study femurs were isolated from genetically double-labeled mBSP9.0Luc/β-ACT-EGFP transgenic mice and were transplanted into adiponectin knock-out mice or wild type mice to investigate the effect of temporary exposure to adiponectin deficiency on bone growth and metabolism. We found that the growth of bone explants in adiponectin knock-out mice was significantly retarded. Histological analysis, microcomputed tomography analysis, and tartrate-resistant acid phosphatase staining revealed reduced trabecular bone volume, decreased cortical bone, and increased osteoclast number in bone explants in adiponectin knock-out mice. We then found that adiponectin inhibits RANKL-induced osteoclastogenesis from RAW264.7 cells and down-regulates RANKL-enhanced expressions of osteoclastogenic regulators including NFAT2, TRAF6, cathepsin K, and tartrate-resistant acid phosphatase. Adiponectin also increases osteoclast apoptosis and decreases survival/proliferation of osteoclast precursor cells. Using siRNA specifically targeting APPL1, the first identified adaptor protein of adiponectin signaling, we found that the inhibitory effect of adiponectin on osteoclasts was induced by APPL1-mediated down-regulation of Akt1 activity. In addition, overexpression of Akt1 successfully reversed adiponectin-induced inhibition in RANKL-stimulated osteoclast differentiation. In conclusion, adiponectin is important in maintaining the balance of energy metabolism, inflammatory responses, and bone formation. © 2011 by The American Society for Biochemistry and Molecular Biology, Inc.