The coupling between bone formation and resorption creates a therapeutic impasse in osteoporosis: antiresorptive therapy halts bone loss, but also inhibits bone formation, and therefore does not cure the condition. Surprisingly, recent preliminary reports suggest that inhibition of resorption by cathepsin K (CathK) inhibitors augments bone formation. Uniquely amongst resorption-inhibitors, CathK-inhibitors suppress degradation of the organic matrix of bone while allowing demineralization. We hypothesized that these unique characteristics might explain a capacity of CathK inhibitors to enhance bone formation: the inhibitors might prevent degradation not only of collagen, but also other proteins, including growth factors embedded in matrix. We tested this hypothesis using osteocalcin and insulin-like growth factor I (IGF-I) as examples of matrix-embedded proteins, and found that CathK-inhibitors, unlike other resorption-inhibitors, dramatically increased the concentrations of these matrix-derived proteins in supernatants of osteoclasts on bone, most likely through protection against intracellular degradation. We found that protons are both necessary and sufficient for the release of IGF-I from bone matrix, and that recombinant CathK can degrade both marker proteins. In the presence of a CathK-inhibitor, the amount of IGF-I released from matrix substantially exceeded the amount secreted by osteoclasts. CathK-inhibition similarly augmented bone morphogenetic protein (BMP)-2 release. Lastly, MC3T3-E1 numbers were greater after co-culture with osteoclasts on bone with versus without CathK-inhibitor, showing that, in the presence of CathK-inhibitor, osteoclasts release biologically-significant quantities of biologically-active matrix-derived growth factors. These results support a model in which osteoclastic secretion of protons demineralizes bone, causing release of growth factors from bone matrix. Normally these are largely degraded, with collagen, in the resorptive hemivacuole and during transcytosis to the basal surface of the osteoclast, but in the presence of CathK inhibitor they are released intact, and so might augment bone formation.