Abstract: T cells undergo rigorous selection processes in the thymus that are necessary to prevent T cells with either autoreactive or nonfunctional T-cell receptors (TCRs) from entering the periphery. Although both positive and negative selection depend on TCR-mediated signals, the means by which a thymocyte interprets these signals to result in survival or death is not understood. Glucocorticoids are known to induce thymocyte apoptosis at high concentrations, but at lower concentrations glucocorticoids can antagonize TCR-mediated deletional signals and allow survival of thymocytes and T cell hybridomas. Interestingly, transgenic mice in which the expression of the glucocorticoid receptor has been downmodulated specifically in thymocytes have abnormal thymocyte differentiation, indicating that glucocorticoids play a significant role in T-cell development. Furthermore, we have demonstrated the presence of steroidogenic enzymes in the thymic epithelium and can show that, in vitro, these cells readily synthesize pregnenolone, the first product in the steroidogenic pathway, and deoxycorticosterone. Inhibition of local glucocorticoid biosynthesis in thymi from TCR transgenic mice during fetal thymic organ culture (FTOC) revealed significant alterations in the process of thymocyte selection. These data suggest that glucocorticoids do not simply suppress the immune system but rather are necessary for thymocyte survival and differentiation.