Increased osteoclast (OC) differentiation and activity is the critical event that results in bone loss and joint destruction in common pathological bone conditions, such as osteoporosis and rheumatoid arthritis (RA). RANKL and its decoy receptor, osteoprotegerin (OPG), control OC differentiation and activity. However, there is a specific concern of a rebound effect of denosumab discontinuation in treating osteoporosis. TNFα can induce OC differentiation that is independent of the RANKL/RANK system. In this review, we discuss the factors that negatively and positively regulate TNFα induction of OC formation, and the mechanisms involved to inform the design of new anti-resorptive agents for the treatment of bone conditions with enhanced OC formation. Similar to, and being independent of, RANKL, TNFα recruits TNF receptor-associated factors (TRAFs) to sequentially activate transcriptional factors NF-κB p50 and p52, followed by c-Fos, and then NFATc1 to induce OC differentiation. However, induction of OC formation by TNFα alone is very limited, since it also induces many inhibitory proteins, such as TRAF3, p100, IRF8, and RBP-j. TNFα induction of OC differentiation is, however, versatile, and Interleukin-1 or TGFβ1 can enhance TNFα-induced OC formation through a mechanism which is independent of RANKL, TRAF6, and/or NF-κB. However, TNFα polarized macrophages also produce anabolic factors, including insulin such as 6 peptide and Jagged1, to slow down bone loss in the pathological conditions. Thus, the development of novel approaches targeting TNFα signaling should focus on its downstream molecules that do not affect its anabolic effect.