Apoptosis through Fas/Fas ligand (FasL) is an important regulator of immune system homeostasis but its role in bone homeostasis is elusive. We systematically analyzed: 1) the expression of Fas/FasL during osteoblastogenesis and osteoclastogenesis in vitro, 2) the effect of FasL on apoptosis and osteoblastic/osteoclastic differentiation, and 3) osteoblastogenesis and osteoclastogenesis in mice deficient in Fas or FasL. The expression of Fas increased with osteoblastic differentiation. Addition of FasL weakly increased the proportion of apoptotic cells in both osteoclastogenic and osteoblastogenic cultures. In a CFU assay, FasL decreased the proportion of osteoblast colonies but did not affect the total number of colonies, indicating specific inhibitory effect of Fas/FasL on osteoblastic differentiation. The effect depended on the activation of caspase 8 and was specific, as addition of FasL to osteoblastogenic cultures significantly decreased gene expression for runt-related transcription factor 2 (Runx2) required for osteoblastic differentiation. Bone marrow from mice without functional Fas or FasL had similar osteoclastogenic potential as bone marrow from wild-type mice, but generated more osteoblast colonies ex vivo. These colonies had increased expression of the osteoblast genes Runx2, osteopontin, alkaline phosphatase, bone sialoprotein, osteocalcin, and osteoprotegerin. Our results indicate that Fas/FasL system primarily controls osteoblastic differentiation by inhibiting progenitor differentiation and not by inducing apoptosis. During osteoclastogenesis, the Fas/FasL system may have a limited effect on osteoclast progenitor apoptosis. The study suggests that Fas/FasL system plays a key role in osteoblastic differentiation and provides novel insight into the interactions between the immune system and bone.