Receptor activator of NF-κB ligand (RANKL) is a critical osteoclastogenic factor that is expressed on bone marrow stromal/preosteoblast cells. Most bone resorption stimuli induce osteoclast formation by modulating RANKL expression in these cells. However, little is known about the mechanisms regulating RANKL gene expression. We recently reported that heat shock factor-2 (HSF-2) is a downstream target for FGF-2 signaling to enhance RANKL gene transcription in marrow stromal/preosteoblast cells. In this study, we show that DACH1 (human homologue of Drosophila dachshund gene) negatively regulates RANKL gene expression and suppresses FGF-2-enhanced RANKL gene expression in these cells. DACH1 contains a conserved dachshund domain (DS) in the N-terminal region, which interacts with the nuclear co-repressor (NCoR) to repress gene expression. Co-expression of DACH1 with hRANKL promoter-luciferase reporter plasmid in normal human bone marrow-derived stromal cells significantly decreased (3.3-fold) FGF-2-stimulated hRANKL gene promoter activity. Deletion of DS domain abolished DACH1 inhibition of FGF-2-enhanced RANKL gene promoter activity. Western blot analysis confirmed that DACH1 suppressed FGF-2-stimulated RANKL expression in marrow stromal/preosteoblast cells. We show HSF-2 co-immune precipitated with DACH1 and that FGF-2 stimulation significantly increased (2.7-fold) HSF-2 binding to DACH1. Confocal microscopy analysis further demonstrated that FGF-2 promotes HSF-2 nuclear transport and co-localization with DACH1 in marrow stromal cells. Co-expression of NCoR with DACH1 significantly decreased (5.3-fold) and siRNA suppression of NCoR in DACH1 co-transfected cells increased (3.6-fold) RANKL promoter activity. Furthermore, DACH1 co-expression with NCoR significantly decreased (7.5-fold) RANKL mRNA expression in marrow stromal cells. Collectively, these studies indicate that NCoR participates in DACH1 repression of RANKL gene expression in marrow stromal/preosteoblast cells. Thus, DACH1 plays an important role in negative regulation of RANKL gene expression in marrow stromal/preosteoblast cells in the bone microenvironment. J. Cell. Biochem. 103: 1747–1759, 2008. © 2007 Wiley-Liss, Inc.