Cbl is an adaptor protein and an E3 ligase that plays both positive and negative roles in several signaling pathways that affect various cellular functions. Tyrosine 737 is unique to Cbl and is phosphorylated by Syk and Src family kinases. Phosphorylated Cbl Tyr(737) creates a binding site for the p85 regulatory subunit of PI3K, which also plays an important role in the regulation of bone resorption by osteoclasts. To investigate the role of Cbl-PI3K interaction in bone homeostasis, we examined the knock-in mice (Cbl(YF/YF)) in which the PI3K binding site in Cbl is ablated due to the mutation in the regulatory tyrosine. We report that in Cbl(YF/YF) mice, despite increased numbers of osteoclasts, bone volume is increased due to defective osteoclast function. Additionally, in ex vivo cultures, mature Cbl(YF/YF) osteoclasts showed an increased ability to survive in the presence of RANKL due to delayed onset of apoptosis. RANKL-mediated signaling is perturbed in Cbl(YF/YF) osteoclasts, and most interestingly, AKT phosphorylation is up-regulated, suggesting that the lack of PI3K sequestration by Cbl results in increased survival and decreased bone resorption. Cumulatively, these in vivo and in vitro results show that, on one hand, binding of Cbl to PI3K negatively regulates osteoclast differentiation, survival, and signaling events (e.g. AKT phosphorylation), whereas on the other hand it positively influences osteoclast function.