Focal resorption of bone at the bone-pannus interface is common in rheumatoid arthritis (RA) and juvenile rheumatoid arthritis (JRA) and can result in significant morbidity. However, the specific cellular and hormonal mechanisms involved in this process are not well established. We examined tissue sections from areas of bone erosion in patients with RA and JRA. Multinucleated cells (MNCs) were present in resorption lacunae in areas of calcified cartilage and in subchondral bone immediately adjacent to calcified cartilage, as previously described. mRNA for the calcitonin receptor (CTR) was localized to these MNCs in bone resorption lacunae, a finding that definitively identifies these cells as osteoclasts. These MNCs were also positive for tartrate-resistant acid phosphatase (TRAP) mRNA and TRAP enzymatic activity. Occasional mononuclear cells on the bone surface were also CTR positive. Mononuclear cells and MNCs not on bone surfaces were CTR negative. The restriction of CTR-positive cells to the surface of mineralized tissues suggests that bone and/or calcified cartilage provide signals that are critical for the differentiation of hematopoietic osteoclast precursors to fully differentiated osteoclasts. Some MNCs and mononuclear cells off bone and within invading tissues were TRAP positive. These cells likely represent the precursors of the CTR-TRAP-positive cells on bone. Parathyroid hormone receptor mRNA was present in cells with the phenotypic appearance of osteoblasts, in close proximity to MNCs, and in occasional cells within pannus tissue, but not in the MNCs in bone resorption lacunae. These findings demonstrate that osteoclasts within the rheumatoid lesion do not express parathyroid hormone receptor. In conclusion, the resorbing cells in RA exhibit a definitive osteoclastic phenotype, suggesting that pharmacological agents that inhibit osteoclast recruitment or activity are rational targets for blocking focal bone erosion in patients with RA and JRA.