Interleukin-1 (IL-1) and tumor necrosis factor (TNF) mediate bone resorption in a variety of diseases affecting bone. Like TNF, IL-1 is secreted by osteoclast precursors (OCPs), but unlike TNF, it does not induce osteoclast formation directly from OCPs in vitro. TNF induces IL-1 expression and activates c-Fos, a transcription factor required in OCPs for osteoclast formation. Here, we examined whether IL-1 can induce osteoclast formation directly from OCPs overexpressing c-Fos and whether interaction with bone matrix affects OCP cytokine expression. We infected OCPs with c-Fos or green fluorescent protein retrovirus, cultured them with macrophage colony-stimulating factor and IL-1 on bone slices or plastic dishes, and assessed osteoclast and resorption pit formation and expression of IL-1 by OCPs. We used a Transwell assay to determine whether OCPs secrete IL-1 when they interact with bone matrix. IL-1 induced osteoclast formation directly from c-Fos-expressing OCPs on plastic. c-Fos-expressing OCPs formed osteoclasts spontaneously on bone slices without addition of cytokines. OCPs on bone secreted IL-1, which induced osteoclast formation from c-Fos-expressing OCPs in the lower Transwell dishes. The bone matrix proteins dentin sialoprotein and osteopontin, but not transforming growth factor-beta, stimulated OCP expression of IL-1 and induced c-Fos-expressing OCP differentiation into osteoclasts. Osteoclasts eroding inflamed joints have higher c-Fos expression compared with osteoclasts inside bone. We conclude that OCPs expressing c-Fos may induce their differentiation directly into osteoclasts by an autocrine mechanism in which they produce IL-1 through interaction with bone matrix. TNF could induce c-Fos expression in OCPs at sites of inflammation in bone to promote this autocrine mechanism and thus amplify bone loss.