Tumor necrosis factor-related, activation-induced cytokine (TRANCE), a tumor necrosis factor family member, mediates survival of dendritic cells in the immune system and is required for osteoclast differentiation and activation in the skeleton. We report the skeletal phenotype of TRANCE-deficient mice and its rescue by the TRANCE transgene specifically expressed in lymphocytes. TRANCE-deficient mice showed severe osteopetrosis, with no osteoclasts, marrow spaces, or tooth eruption, and exhibited profound growth retardation at several skeletal sites, including the limbs, skull, and vertebrae. These mice had marked chondrodysplasia, with thick, irregular growth plates and a relative increase in hypertrophic chondrocytes. Transgenic overexpression of TRANCE in lymphocytes of TRANCE-deficient mice rescued osteoclast development in two locations in growing long bones: excavation of marrow cavities permitting hematopoiesis in the marrow spaces, and remodeling of osteopetrotic woven bone in the shafts of long bones into histologically normal lamellar bone. However, osteoclasts in these mice failed to appear at the chondroosseous junction and the metaphyseal periosteum of long bones, nor were they present in tooth eruption pathways. These defects resulted in sclerotic metaphyses with persistence of club-shaped long bones and unerupted teeth, and the growth plate defects were largely unimproved by the TRANCE transgene. Thus, TRANCE-mediated regulation of the skeleton is complex, and impacts chondrocyte differentiation and osteoclast formation in a manner that likely requires local delivery of TRANCE.