Objective. To investigate the mechanisms whereby tumor necrosis factor α (TNFα) increases osteoclastogenesis in vivo. Methods. TNFα-transgenic (TNF-Tg) and wild-type mice injected with TNFα were studied. In vitro osteoclastogenesis assays, monocyte colony-forming assays, and fluorescence-activated cell sorting were performed using splenocytes, peripheral blood mononuclear cells (PBMCs), and bone marrow cells to quantify and characterize osteoclast precursors (OCPs). Etanercept, a TNFα antagonist, was used to block TNFα activity in vivo. The effects of TNFα on proliferation, apoptosis, and differentiation of OCPs were assessed using 5-bromo-2′-deoxyuridine labeling, annexin V staining, and reverse transcriptase-polymerase chain reaction. Results. OCP numbers were increased 4-7-fold in PBMCs and spleen, but not in bone marrow of TNF-Tg mice. The OCPs in spleen were in the CD11bhigh population and contained both c-Fms- and c-Fms+ cells. The increased number of OCPs correlated with the initiation of detectable TNFα in serum and the onset of inflammatory arthritis in TNF-Tg mice. Etanercept eliminated the increase in peripheral OCPs. TNFα did not affect proliferation, survival, or differentiation of CD11bhigh splenocytes in vivo or in vitro, but caused a rapid increase in CD11b+ cells in blood within 4 hours of a single injection and an accumulation of CD11bhigh OCPs in spleen after 3 days of multiple injections. Conclusion. Systemic TNFα induces a marked increase in circulating OCPs that is reversible by anti-TNF therapy and may result from their mobilization from bone marrow. Our findings provide a new mechanism whereby TNFα stimulates osteoclastogenesis in patients with inflammatory arthritis, suggesting that CD11b+ PBMCs could be used to evaluate a patient's potential for erosive disease and the efficacy of anti-TNF therapy.