Osteoclasts are large polykaryons that have the unique capacity to degrade bone and are generated by the differentiation of myeloid lineage progenitors. To identify the genes involved in osteoclast development, we performed microarray analysis, and we found that carboxypeptidase E (CPE), a prohormone processing enzyme, was highly upregulated in osteoclasts compared with their precursors, bone marrow-derived macrophages (BMMs). Here, we demonstrate a novel role for CPE in receptor activator of NF-${kappa}B$ ligand (RANKL)-induced osteoclast differentiation. The overexpression of CPE in BMMs increases the formation of tartrate-resistant acid phosphatase (TRAP)-positive multinuclear osteoclasts and the expression of c-Fos and nuclear factor of activated T cells c1 (NFATc1), which are key regulators in osteoclastogenesis. Furthermore, employing CPE knockout mice, we show that CPE deficiency attenuates osteoclast formation. Together, our data suggest that CPE might be an important modulator of RANKL-induced osteoclast differentiation.