Macrophages can undergo cell-cell fusion, leading to the formation of multinucleated giant cells and osteoclasts. This process is believed to promote the proteolytic activity of macrophages toward pathogens, foreign bodies, and extracellular matrices. Here, we examined the role of PTP-PEST (PTPN12), a cytoplasmic protein tyrosine phosphatase, in macrophage fusion. Using a macrophage-targeted PTP-PEST-deficient mouse, we determined that PTP-PEST was not needed for macrophage differentiation or cytokine production. However, it was necessary for interleukin-4-induced macrophage fusion into multinucleated giant cells in vitro. It was also needed for macrophage fusion following implantation of a foreign body in vivo. Moreover, in the RAW264.7 macrophage cell line, PTP-PEST was required for receptor activator of nuclear factor kappa-B ligand (RANKL)-triggered macrophage fusion into osteoclasts. PTP-PEST had no impact on expression of fusion mediators such as β-integrins, E-cadherin, and CD47, which enable macrophages to become fusion competent. However, it was needed for polarization of macrophages, migration induced by the chemokine CC chemokine ligand 2 (CCL2), and integrin-induced spreading, three key events in the fusion process. PTP-PEST deficiency resulted in specific hyperphosphorylation of the protein tyrosine kinase Pyk2 and the adaptor paxillin. Moreover, a fusion defect was induced upon treatment of normal macrophages with a Pyk2 inhibitor. Together, these data argue that macrophage fusion is critically dependent on PTP-PEST. This function is seemingly due to the ability of PTP-PEST to control phosphorylation of Pyk2 and paxillin, thereby regulating cell polarization, migration, and spreading.