The maintenance of bone homeostasis requires tight coupling between the bone-forming osteoblasts and bone-resorbing osteoclasts. Here we have utilised subtractive hybridisation to identify an osteoclast secreted factor that acts as a negative autocrine regulator, Prostate and Testis Expressed 4 (PATE4). PATE4 has been previously identified in reproductive and neural tissues, and was identified as an α7 nicotinic acetylcholine receptor (nAchR) agonist. Recent evidence indicates a role for cholinergic signalling in bone homeostasis. We found that PATE4 is expressed by mature osteoclasts in the bone microenvironment. Addition of recombinant PATE4 to RANKL stimulated osteoclast cultures resulted in inhibition of osteoclast differentiation. Global knockout of PATE4 in mice led to osteopenia as assessed by microcomputed tomography (microCT). In contrast, global overexpression of PATE4 led to an increased bone mass in male mice. Increased numbers of osteoclasts were generated when PATE4-/- bone marrow macrophages were stimulated with RANKL, relative to wild type cells, and the osteoclasts showed increased spread area, increased nuclei number, and subsequently increased bone resorption. Loss of PATE4 resulted in an increased number of cells exhibiting calcium oscillation following RANKL stimulation of PATE4-/- bone marrow precursors, and deregulation of calcium influx at low extracellular calcium concentrations in mature PATE4-/- osteoclasts. These results are consistent with PATE4 interacting with the α7 nAchR in osteoclast precursors to modulate calcium flux and subsequently negatively regulate downstream osteoclast formation and function.