Osteoclasts are bone-resorbing cells essential for skeletal development, homeostasis, and regeneration. They derive from hematopoietic progenitors in the monocyte/macrophage lineage and differentiate in response to RANKL. However, the precise nature of osteoclast progenitors is a longstanding and important question. Using inducible peroxisome proliferator-activated receptor γ (PPARγ)-tTA TRE-GFP (green fluorescent protein) reporter mice, we show that osteoclast progenitors reside specifically in the PPARγ-expressing hematopoietic bone marrow population and identify the quiescent PPARγ(+) cells as osteoclast progenitors. Importantly, two PPARγ-tTA TRE-Cre-controlled genetic models provide compelling functional evidence. First, Notch activation in PPARγ(+) cells causes high bone mass due to impaired osteoclast precursor proliferation. Second, selective ablation of PPARγ(+) cells by diphtheria toxin also causes high bone mass due to decreased osteoclast numbers. Furthermore, PPARγ(+) cells respond to both pathological and pharmacological resorption-enhancing stimuli. Mechanistically, PPARγ promotes osteoclast progenitors by activating GATA2 transcription. These findings not only identify the long-sought-after osteoclast progenitors but also establish unprecedented tools for their visualization, isolation, characterization, and genetic manipulation.