Many skeletal diseases are characterized by excessive bone loss. Bone loss is mediated by osteoclasts, which are differentiated from cells of the monocyte/macrophage lineage upon stimulation of two indispensable factors, the RANKL and M-CSF. Lipopolysaccharide (LPS), a bacterial pathogenic factor, has also been shown to engage in osteoclastogenesis during inflammatory events actively. C-phycocyanin (C-PC) is a phycobiliprotein found in the blue-green algae that showed many therapeutic effects, including anti-arthritic and anti-inflammatory properties. However, the exact mechanism by which LPS regulates osteoclastogenesis and also the impact of C-PC on osteoclastogenesis needs further elucidations. We studied the osteoclast differentiation process in vitro using RAW 264.7 macrophage cell line. First, we showed that LPS induced osteoclastogenesis in RANKL-primed cells in vitro. LPS elicited osteoclastogenic mechanism by signaling through the TLR4 receptor, which is expressed in osteoclast precursors. Here we also found that TNF-α secreted by osteoclast precursors in response to TLR4 stimulation regulated the processes of osteoclastogenesis via TNF-R signaling. Second, we tested the inhibitory effect of C-PC on osteoclastogenesis. We showed here that C-PC strongly inhibited the early stage of osteoclast differentiation, thus significantly suppressing RANKL- and LPS- mediated osteoclastogenesis. Nonetheless, osteoblast differentiation and activity were not affected by C-PC. Reactive oxygen species (ROS) are generated during RANKL-mediated osteoclast differentiation. While studying the possible mechanisms of osteoclast differentiation, we found that C-PC a) attenuated RANKL-induced ROS; and b) interfered with RANKL-stimulated NF-κB signaling by preventing the degradation of cytosolic IκB-α; subsequently, these resulted in the loss of sequential activation of the osteoclastogenic downstream markers such as c-Fos and NFATc1. We propose that a unique mechanism of osteoclastogenesis is mediated by bacterial LPS that can be targeted during inflammatory-mediated bone loss. Also, C-PC could potentially be used as a therapeutic compound in osteolytic diseases caused by osteoclast activation without affecting osteoblast function.