The central role of reactive oxygen species (ROS) in osteoclast differentiation and in bone homeostasis prompted us to characterize the redox regulatory system of osteoclasts. In this report, we describe the expression and functional characterization of PAMM, a CXXC motif-containing peroxiredoxin 2-like protein expressed in bone marrow monocytes on stimulation with M-CSF and RANKL. Expression of wild-type (but not C to G mutants of the CXXC domain) PAMM in HEK293 cells results in an increased GSH/GSSG ratio, indicating a shift toward a more reduced environment. Expression of PAMM in RAW264.7 monocytes protected cells from hydrogen peroxide-induced oxidative stress, indicating that PAMM regulates cellular redox status. RANKL stimulation of RAW 264.7 cells caused a decrease in the GSH/GSSG ratio (reflecting a complementary increase in ROS). In addition, RANKL-induced osteoclast formation requires phosphorylation and translocation of NF-kappaB and c-Jun. In stably transfected RAW 264.7 cells, PAMM overexpression prevented the reduction of GSH/GSSG induced by RANKL. Concurrently, PAMM expression completely abolished RANKL-induced p100 NF-kappaB and c-Jun activation, as well as osteoclast formation. We conclude that PAMM is a redox regulatory protein that modulates osteoclast differentiation in vitro. PAMM expression may affect bone resorption in vivo and help to maintain bone mass.