The cytokines RANKL and TNF activate NF-κB signaling in osteoclast precursors (OCPs) to induce osteoclast (OC) formation. Conversely, TNF can limit OC formation through NF-κB p100, which acts as an inhibitor, and TNF receptor-associated receptor 3 (TRAF3); however, a role for TRAF3 in RANKL-mediated OC formation is unknown. We found that TRAF3 limits RANKL-induced osteoclastogenesis by suppressing canonical and noncanonical NF-κB signaling. Conditional OC-specific Traf3-KO (cKO) mice had mild osteoporosis and increased OC formation. RANKL induced TRAF3 degradation via the lysosome/autophagy system. The autophagy/lysosome inhibitor chloroquine reduced RANKL-induced OC formation and function by increasing TRAF3 expression in OCPs in vitro and in vivo. Although chloroquine had no effect on basal bone resorption, it inhibited parathyroid hormone- and ovariectomy-induced OC activation in WT, but not cKO, mice. Deletion of the transcription factor gene Relb resulted in increased TRAF3 expression in OCPs, which was associated with decreased RANKL-induced TRAF3 degradation. RelB directly increased expression of BECN1, a key autophagy regulator, by binding to its promoter. These data indicate that autophagic/lysosomal degradation of TRAF3 is an important step in RANKL-induced NF-κB activation in OCPs. Furthermore, treatments that increase TRAF3 levels in OCPs, including pharmacological inhibition of its degradation with compounds such as chloroquine, may limit bone destruction in common bone diseases.