Osteoclasts (OCs) are bone-resorbing cells that are formed from hematopoietic precursors. OCs ordinarily maintain bone homeostasis, but they can also cause major pathology in autoimmune and inflammatory diseases. Under homeostatic conditions, receptor activator of nuclear factor kappa-B (RANK) ligand on osteoblasts drives OC differentiation by interaction with its receptor RANK on OC precursors. During chronic immune activation, RANK ligand on activated immune cells likewise drives pathogenic OC differentiation. We here report that the related TNF family member CD70 and its receptor CD27 can also mediate cross-talk between immune cells and OC precursors. We identified CD27 on a rare population (0.3%) of B220 ⁻ c-Kit ⁺ CD115 ⁺ CD11b ^low cells in the mouse bone marrow (BM) that are highly enriched for osteoclastogenic potential. We dissected this population into CD27 ^high common precursors of OC, dendritic cells (DCs) and macrophages and CD27 ^low/neg downstream precursors that could differentiate into OC and macrophages, but not DC. In a recombinant mouse model of chronic immune activation, sustained CD27/CD70 interactions caused an accumulation of OC precursors and a reduction in OC activity. These events were due to a CD27/CD70-dependent inhibition of OC differentiation from the OC precursors by BM-infiltrating, CD70 ⁺ -activated immune cells. DC numbers in BM and spleen were increased, suggesting a skewing of the OC precursors toward DC differentiation. The impediment in OC differentiation culminated in a high trabecular bone mass pathology. Mice additionally presented anemia, leukopenia, and splenomegaly. Thus, under conditions of constitutive CD70 expression reflecting chronic immune activation, the CD27/CD70 system inhibits OC differentiation and favors DC differentiation.