Background: We assessed the mechanism by which multiple myeloma (MM) shapes the bone marrow (BM) microenvironment and affects MΦ polarization. Methods: In vivo xenograft model of BM-disseminated human myeloma, as well as analysis of MM cell lines, stromal components, and primary samples from patients with MM, was utilized. Results: Analysis of the BM from MM-bearing mice inoculated with human CXCR4-expressing RPMI8226 cells revealed a significant increase in M2 MΦ cell numbers (p < 0.01). CXCL13 was one of the most profoundly increased factors upon MM growth with increased levels in the blood of MM-bearing animals. Myeloid cells were the main source of the increased murine CXCL13 detected in MM-infiltrated BM. MM cell lines induced CXCL13 and concurrent expression of M2 markers (MERTK, CD206, CD163) in co-cultured human MΦ in vitro. Interaction with MΦ reciprocally induced CXCL13 expression in MM cell lines. Mechanistically, TGFβ signaling was involved in CXCL13 induction in MM cells, while BTK signaling was implicated in MM-stimulated increase of CXCL13 in MΦ. Recombinant CXCL13 increased RANKL expression and induced TRAP+ osteoclast (OC) formation in vitro, while CXCL13 neutralization blocked these activities. Moreover, mice inoculated with CXCL13-silenced MM cells developed significantly lower BM disease. Reduced tumor load correlated with decreased numbers of M2 MΦ in BM, decreased bone disease, and lower expression of OC-associated genes. Finally, higher levels of CXCL13 were detected in the blood and BM samples of MM patients in comparison with healthy individuals. Conclusions: Altogether, our findings suggest that bidirectional interactions of MΦ with MM tumor cells result in M2 MΦ polarization, CXCL13 induction, and subsequent OC activation, enhancing their ability to support bone resorption and MM progression. CXCL13 may thus serve as a potential novel target in MM.