Shwachman-Diamond syndrome (SDS) results from mutations in the SBDS gene, characterized by exocrine pancreatic insufficiency and hematologic and skeletal abnormalities. Neutropenia and neutrophil dysfunction are hallmark features of SDS; however, causes for the bone defects are unknown. Dysfunction of bone-resorbing osteoclasts, formed by the fusion of monocytic progenitors derived from the same granulocytic precursors as neutrophils, could be responsible. We report that Sbds is required for in vitro and in vivo osteoclastogenesis (OCG). Sbds-null murine monocytes formed osteoclasts of reduced number and size because of impaired migration and fusion required for OCG. Phenotypically, Sbds-null mice exhibited low-turnover osteoporosis consistent with findings in SDS patients. Western blotting of Rho GTPases that control actin dynamics and migration showed a 5-fold decrease in Rac2, whereas Rac1, Cdc42, and RhoA were unchanged or only mildly reduced. Although migration was rescued on Rac2 supplementation, OCG was not. This was attributed to impaired signaling downstream of receptor activator of nuclear factor-κB (RANK) and reduced expression of the RANK-ligand-dependent fusion receptor DC-STAMP. We conclude that Sbds is required for OCG by regulating monocyte migration via Rac2 and osteoclast differentiation signaling downstream of RANK. Impaired osteoclast formation could disrupt bone homeostasis, resulting in skeletal abnormalities seen in SDS patients.