Myeloid-derived suppressor cells (MDSCs), identified as Gr1(+)CD11b(+) cells in mice, expand during cancer and promote tumor growth, recurrence and burden. However, little is known about their role in bone metastases. We hypothesized that MDSCs may contribute to tumor-induced bone disease, and inoculated breast cancer cells into the left cardiac ventricle of nude mice. Disease progression was monitored weekly by X-ray and fluorescence imaging and MDSCs expansion by fluorescence-activated cell sorting. To explore the contribution of MDSCs to bone metastasis, we co-injected mice with tumor cells or PBS into the left cardiac ventricle and Gr1(+)CD11b(+) cells isolated from healthy or tumor-bearing mice into the left tibia. MDSCs didn't induce bone resorption in normal mice, but increased resorption and tumor burden significantly in tumor-bearing mice. In vitro experiments showed that Gr1(+)CD11b(+) cells isolated from normal and tumor-bearing mice differentiate into osteoclasts when cultured with RANK ligand and macrophage colony-stimulating factor, and that MDSCs from tumor-bearing mice upregulate parathyroid hormone-related protein (PTHrP) mRNA levels in cancer cells. PTHrP upregulation is likely due to the 2-fold increase in transforming growth factor β expression that we observed in MDSCs isolated from tumor-bearing mice. Importantly, using MDSCs isolated from GFP-expressing animals, we found that MDSCs differentiate into osteoclast-like cells in tumor-bearing mice as evidenced by the presence of GFP(+)TRAP(+) cells. These results demonstrate that MDSCs expand in breast cancer bone metastases and induce bone destruction. Furthermore, our data strongly suggest that MDSCs are able to differentiate into osteoclasts in vivo and that this is stimulated in the presence of tumors.