The cellular mechanisms which account for the formation of osteoclasts and bone resorption associated with enlarging benign and malignant mesenchymal tumours of bone are uncertain. Osteoclasts are marrow-derived, multinucleated, bone-resorbing cells which express a macrophage phenotype. We have determined whether tumour-associated macrophages (TAMs) isolated from benign and malignant mesenchymal tumours are capable of differentiating into osteoclasts. Macrophages were cultured on both coverslips and dentine slices for up to 21 days with UMR 106 osteoblastic cells in the presence of 1,25 dihydroxyvitamin D3 (1,25(OH)2D3) and human macrophage colony-stimulating factor (M-CSF) or, in the absence of UMR 106 cells, with M-CSF and RANK ligand. In all tumours, the formation of osteoclasts from CD14-positive macrophages was shown by the formation of tartrate-resistant-acid-phosphatase and vitronectin-receptor-positive multinucleated cells which were capable of carrying out lacunar resorption. These results indicate that the tumour osteolysis associated with the growth of mesenchymal tumours in bone is likely to be due in part to the differentiation of mononuclear phagocyte osteoclast precursors which are present in the TAM population of these lesions.