TREM2 is an immunoreceptor expressed on osteoclasts (OC) and microglia that transmits intracellular signals through the adaptor DAP12. Individuals with genetic mutations inactivating TREM2 or DAP12 develop the Nasu-Hakola disease (NHD) with cystic-like lesions of the bone and brain demyelination that lead to fractures and presenile dementia. The mechanisms of this disease are poorly understood. In this study, we report that TREM2-deficient mice have an osteopenic phenotype reminiscent of NHD. In vitro, lack of TREM2 impairs proliferation and β-catenin activation in osteoclast precursors (OcP) in response to M-CSF. This defect results in accelerated differentiation of OcP into mature OC. Corroborating the importance of a balanced proliferation and differentiation of OcP for bone homeostasis, we show that conditional deletion of β-catenin in OcP also results in reduced OcP proliferation and accelerated osteoclastogenesis in vitro as well as osteopenia in vivo. These results reveal that TREM2 regulates the rate of osteoclastogenesis and provide a mechanism for the bone pathology in NHD.