Osteocytes are the most abundant cells in bone and distributed throughout the bone matrix. They are connected to the each other and to the cells on the bone surface. Thus, they may also secrete some regulatory factors controlling bone remodeling. Using a newly established osteocyte-like cell line MLO-Y4, we have studied the interactions between osteocytes and osteoclasts. We collected the conditioned medium (CM) from MLO-Y4 cells, and added it into the rat osteoclast cultures. The conditioned medium had no effect on osteoclast number in 24-h cultures, but it dramatically inhibited resorption. With 5, 10, and 20% CM, there was 25, 39, and 42% inhibition of resorption, respectively. Interestingly, the inhibitory effect was even more pronounced, when MLO-Y4 cells were pretreated with 10−8 M 17-β-estradiol. With 5, 10, and 20% CM, there was 46, 51, and 58% of inhibition. When the conditioned medium was treated with neutralizing antibody against transforming growth factor-β (TGF-β), the inhibitory effect was abolished. This suggests that osteocytes secrete significant amounts of TGF-β, which inhibits bone resorption and is modulated by estrogen. RT–PCR and Western blot analysis show that in MLO-Y4 cells, the prevalent TGF-β isoform is TGF-β3. We conclude that osteocytes have an active, inhibitory role in the regulation of bone resorption. Our results further suggest a novel role for TGF-β in the regulation of communication between different bone cells and suggest that at least part of the antiresorptive effect of estrogen in bone could be mediated via osteocytes. J. Cell. Biochem. 85: 185–197, 2002. © 2002 Wiley-Liss, Inc.