Patients with pycnodysostosis, a rare skeletal dysplasia, present with bone abnormalities such as short stature, acroosteolysis of distal phalanges, and skull deformities. The disease is caused by a deficiency of the cysteine protease cathepsin K which is responsible for degradation of collagen type I and other bone proteins. Osteoclasts, bone cells of hematopoietic origin responsible for bone mineral as well as protein matrix degradation, are dysfunctional in patients with pycnodysostosis due to mutations in the cathepsin K gene. Cathepsin K deficient osteoclasts can demineralize bone but cannot degrade the protein matrix. Mutations in the cathepsin K gene disrupting wild type cathepsin K activity have been described in patients with pycnodysostosis. Animal models of cathepsin K deficiency have been created and provide a valuable tool to study osteoclast function and treatment for cathepsin K deficiency. Understanding the regulation and role of cathepsin K in osteoclast function is important for designing future therapies for pycnodysostosis. Cathepsin K inhibitors will be useful in pathological processes involving excess osteoclast activation and bone resorption such as osteoporosis, bone metastasis and multiple myeloma. This review will discuss the bone remodeling cycle, the human disease pycnodysostosis caused by cathepsin K deficiency and cathepsin K activity and regulation.