T cell-produced cytokines play a pivotal role in the bone loss caused by inflammation, infection, and estrogen deficiency. IFN-gamma is a major product of activated T helper cells that can function as a pro- or antiresorptive cytokine, but the reason why IFN-gamma has variable effects in bone is unknown. Here we show that IFN-gamma blunts osteoclast formation through direct targeting of osteoclast precursors but indirectly stimulates osteoclast formation and promotes bone resorption by stimulating antigen-dependent T cell activation and T cell secretion of the osteoclastogenic factors RANKL and TNF-alpha. Analysis of the in vivo effects of IFN-gamma in 3 mouse models of bone loss - ovariectomy, LPS injection, and inflammation via silencing of TGF-beta signaling in T cells - reveals that the net effect of IFN-gamma in these conditions is that of stimulating bone resorption and bone loss. In summary, IFN-gamma has both direct anti-osteoclastogenic and indirect pro-osteoclastogenic properties in vivo. Under conditions of estrogen deficiency, infection, and inflammation, the net balance of these 2 opposing forces is biased toward bone resorption. Inhibition of IFN-gamma signaling may thus represent a novel strategy to simultaneously reduce inflammation and bone loss in common forms of osteoporosis.