Oncohistones represent compelling evidence for a causative role of epigenetic perturbations in cancer. Giant cell tumours of bone (GCTs) are characterised by a mutated histone H3.3 as the sole genetic driver present in bone-forming osteoprogenitor cells but absent from abnormally large bone-resorbing osteoclasts which represent the hallmark of these neoplasms. While these striking features imply a pathogenic interaction between mesenchymal and myelomonocytic lineages during GCT development, the underlying mechanisms remain unknown. We show that the changes in the transcriptome and epigenome in the mesenchymal cells caused by the H3.3-G34W mutation contribute to increase osteoclast recruitment in part via reduced expression of the TGFβ-like soluble factor, SCUBE3. Transcriptional changes in SCUBE3 are associated with altered histone marks and H3.3G34W enrichment at its enhancer regions. In turn, osteoclasts secrete unregulated amounts of SEMA4D which enhances proliferation of mutated osteoprogenitors arresting their maturation. These findings provide a mechanism by which GCTs undergo differentiation in response to denosumab, a drug that depletes the tumour of osteoclasts. In contrast, hTERT alterations, commonly found in malignant GCT, result in the histone-mutated neoplastic cells being independent of osteoclasts for their proliferation, predicting unresponsiveness to denosumab. We provide a mechanism for the initiation of GCT, the basis of which is dysfunctional cross-talk between bone-forming and bone-resorbing cells. The findings highlight the role of tumour/microenvironment bidirectional interactions in tumorigenesis and how this is exploited in the treatment of GCT.