Osteoprotegerin (OPG) is a secreted member of the TNF receptor superfamily which binds to receptor activator of nuclear factor kB ligand (RANKL) and inhibits osteoclast activity and bone resorption. Systemic administration of recombinant OPG was previously shown to inhibit tumour growth in bone and prevent cancer-induced osteolysis. In this study we examined the effect of OPG when produced locally by breast cancer cells in bone using a mouse model of osteolytic breast cancer. MDA-MB-231-TXSA breast cancer cells, tagged with a luciferase reporter gene construct and engineered to overexpress full-length human OPG were transplanted directly into the tibial marrow cavity of nude mice. Tumour progression was monitored in live animals using bioluminescence imaging, whereas the development of breast cancer-induced osteolysis was measured using high resolution micro-computer tomography and histology. Animals transplanted with empty vector-transfected cells developed large osteolytic lesions involving the cortices and led to tumour growth extending into the surrounding soft tissues. In contrast, over-expression of OPG by breast cancer cells protected the bone from breast cancer-induced osteolysis, diminished intra-osseous tumour growth but was without effect on extra-skeletal tumour growth. This effect was associated with a significant reduction in the number of osteoclast lining the bone surface. This demonstrates that tumour production of OPG exerts indirect effects on tumour growth by inhibiting osteoclast-mediated bone loss, which in turn restricts tumour cell growth in the diaphysis. Despite the bone protection, OPG over-expression resulted in a significant increase in the incidence of pulmonary metastasis. Our results demonstrate for the first time that OPG secreted by tumours in bone may affect the behaviour of cancer cells within the bone microenvironment and their likelihood of spreading and establishing metastases elsewhere in the body.