The directed differentiation of human pluripotent stem cells offers the unique opportunity to generate a broad spectrum of human cell types and tissues for transplantation, drug discovery, and studying disease mechanisms. Here, we report the stepwise generation of bone-resorbing osteoclasts from human embryonic and induced pluripotent stem cells. Generation of a primitive streak-like population in embryoid bodies, followed by specification to hematopoiesis and myelopoiesis by vascular endothelial growth factor and hematopoietic cytokines in serum-free media, yielded a precursor population enriched for cells expressing the monocyte-macrophage lineage markers CD14, CD18, CD11b, and CD115. When plated in monolayer culture in the presence of macrophage colony-stimulating factor and receptor activator of nuclear factor-kappaB ligand (RANKL), these precursors formed large, multinucleated osteoclasts that expressed tartrate-resistant acid phosphatase and were capable of resorption. No tartrate-resistant acid phosphatase-positive multinucleated cells or resorption pits were observed in the absence of RANKL. Molecular analyses confirmed the expression of the osteoclast marker genes NFATc1, cathepsin K, and calcitonin receptor in a RANKL-dependent manner, and confocal microscopy demonstrated the coexpression of the alphavbeta3 integrin, cathepsin K and F-actin rings characteristic of active osteoclasts. Generating hematopoietic and osteoclast populations from human embryonic and induced pluripotent stem cells will be invaluable for understanding embryonic bone development and postnatal bone disease.