Excessive bone loss in arthritic diseases is mostly due to abnormal activation of the immune system leading to stimulation of osteoclasts. While phospholipase Cγ (PLCγ) isoforms are known modulators of T and B lymphocyte–mediated immune responses, we found that blockade of PLCγ enzymatic activity also blocks early osteoclast development and function. Importantly, targeted deletion of Plcg2 in mice led to an osteopetrotic phenotype. PLCγ2, independent of PLCγ1, was required for receptor activator of NF-κB ligand–induced (RANKL-induced) osteoclastogenesis by differentially regulating nuclear factor of activated T cells c1 (NFATc1), activator protein–1 (AP1), and NF-κB. Specifically, we show that NFATc1 upregulation is dependent on RANKL-mediated phosphorylation of PLCγ2 downstream of Dap12/Fc receptor γ (Dap12/FcRγ) receptors and is blocked by the PLCγ inhibitor U73122. In contrast, activation of JNK and NF-κB was not affected by U73122 or Dap12/FcRγ deletion. Interestingly, we found that in osteoclasts, PLCγ2 formed a complex with the regulatory adapter molecule GAB2, was required for GAB2 phosphorylation, and modulated GAB2 recruitment to RANK. Thus, PLCγ2 mediates RANKL-induced osteoclastogenesis and is a potential candidate for antiresorptive therapy.