IL-23 has been well studied in the context of T cell differentiation; however, its role in the differentiation of myeloid progenitors is less clear. In this paper, we describe a novel role of IL-23 in myeloid cell differentiation. Specifically, we have identified that in human PBMCs, IL-23 induces the expression of MDL-1, a PU.1 transcriptional target during myeloid differentiation, which orchestrates osteoclast differentiation through activation of DNAX activating protein of 12 kDa and its ITAMs. The molecular events that lead to the differentiation of human macrophages to terminally differentiated osteoclasts are dependent on spleen tyrosine kinase and phospholipase Cγ2 phosphorylation for the induction of intracellular calcium flux and the subsequent activation of master regulator osteoclast transcription factor NFATc1. IL-23-elicited osteoclastogenesis is independent of the receptor activator of NF-κB ligand pathway and uses a unique myeloid DNAX activating protein of 12 kDa-associated lectin-1(+)/DNAX activating protein of 12 kDa(+) cell subset. Our data define a novel pathway that is used by IL-23 in myeloid cells and identify a major mechanism for the stimulation of osteoclastogenesis in inflammatory arthritis.