Multinucleated giant cells derive from fusion of precursor cells of the macrophage lineage. It has been proposed that the purinoreceptor P2X7 is involved in this fusion process. Prolonged exposure of macrophages to ATP, the ligand for P2X7, induces the formation of plasma membrane pores and eventual cell death. We took advantage of this cytolytic property to select RAW 264.7 (RAW) cells that lacked P2X7 function by maintaining them in ATP (RAW ATP-R cells). RAW ATP-R cells failed to fuse to form multinucleated osteoclasts in response to receptor activator of NF-B ligand (RANKL), although they did become positive for the osteoclast marker enzyme tartrate-resistant acid phosphatase (TRAP), and up-regulated expression of other osteoclast marker genes. RAW ATP-R cells and wild-type RAW cells expressed similar amounts of P2X7 protein, but little P2X7 was present on the surface of RAW ATP-R cells. After ATP was removed from the medium of RAW ATP-R cells, the cells re-expressed P2X7 on the cell surface, regained sensitivity to ATP, and formed multinucleated osteoclasts. These results suggest that P2X7 or another protein that is down-regulated in concert with P2X7 is involved either in the mechanics of cell fusion to form osteoclasts, or in a signaling pathway proximal to this event. These results also suggest that P2X7 may be regulated by ligand-mediated internalization and that extracellular ATP may regulate the formation of osteoclasts and other multinucleated giant cells.