The link between bone and blood vessels is regulated by hypoxia and the hypoxia-inducible transcription factor, HIF, which drives both osteogenesis and angiogenesis. The recent clinical approval of PHD enzyme inhibitors, which stabilize HIF protein, introduces the potential for a new clinical strategy to treat osteolytic conditions such as osteoporosis, osteonecrosis, and skeletal fracture and nonunion. However, bone-resorbing osteoclasts also play a central role in bone remodeling and pathological osteolysis, and HIF promotes osteoclast activation and bone loss in vitro. It is therefore likely that the result of PHD enzyme inhibition in vivo would be mediated by a balance between increased bone formation and increased bone resorption. It is essential that we improve our understanding of the effects of HIF on osteoclast formation and function and consider the potential contribution of inhibitory interactions with other musculoskeletal cells. The PHD enzyme inhibitor FG-4592 stabilized HIF protein and stimulated osteoclast-mediated bone resorption, but inhibited differentiation of human CD14+ monocytes into osteoclasts. Formation of osteoclasts in a more physiologically relevant 3D collagen gel did not affect the sensitivity of osteoclastogenesis to FG-4592, but increased sensitivity to reduced concentrations of RANKL. Coculture with osteoblasts amplified inhibition of osteoclastogenesis by FG-4592, whether the osteoblasts were proliferating, differentiating, or in the presence of exogenous M-CSF and RANKL. Osteoblast coculture dampened the ability of high concentrations of FG-4592 to increase bone resorption. These data provide support for the therapeutic use of PHD enzyme inhibitors to improve bone formation and/or reduce bone loss for the treatment of osteolytic pathologies and indicate that FG-4592 might act in vivo to inhibit the formation and activity of the osteoclasts that drive osteolysis.