Osteolytic bone disease is a hallmark of multiple myeloma (MM). A significant fraction (~20%) of MM patients do not develop osteolytic lesions (OLs). The molecular basis for the absence of bone disease in MM is not understood. We combined PET-CT and gene expression profiling (GEP) of purified BM CD138⁺ MM cells from 512 newly diagnosed MM patients to reveal that elevated expression of cystatin M/E (CST6) was significantly associated with the absence of OL in MM. An enzyme-linked immunosorbent assay revealed a strong correlation between CST6 levels in BM serum/plasma and CST6 mRNA expression. Both recombinant CST6 protein and BM serum from patients with high CST6 significantly inhibited the activity of the osteoclast-specific protease cathepsin K and blocked osteoclast differentiation and function. Recombinant CST6 inhibited bone destruction in ex vivo and in vivo myeloma models. Single-cell RNA-Seq showed that CST6 attenuates polarization of monocytes to osteoclast precursors. Furthermore, CST6 protein blocks osteoclast differentiation by suppressing cathepsin-mediated cleavage of NF-κB/p100 and TRAF3 following RANKL stimulation. Secretion by MM cells of CST6, an inhibitor of osteoclast differentiation and function, suppresses osteolytic bone disease in MM and probably other diseases associated with osteoclast-mediated bone loss.