Tissue damage by proinflammatory cytokines is attenuated at both systemic and cellular levels by counter anti-inflammatory factors such as corticosteroids. Target cell responses to corticosteroids are dependent on several factors including prereceptor regulation via local steroidogenic enzymes. In particular, two isozymes of 11β-hydroxysteroid dehydrogenase (11β-HSD), by interconverting hormonally active cortisol (F) to inactive cortisone (E), regulate the peripheral action of corticosteroids 11β-HSD1 by converting E to F and 11β-HSD2 by inactivating F to E. In different in vitro and in vivo systems both 11β-HSD isozymes have been shown to be expressed in osteoblasts (OBs). Using the MG-63 human osteosarcoma cell-line and primary cultures of human OBs, we have studied the regulation of osteoblastic 11β-HSD isozyme expression and activity by cytokines and hormones with established roles in bone physiology. In MG-63 cells, interleukin-1β (IL-1β) and tumor necrosis factor α (TNF-α) potently inhibited 11β-HSD2 activity (cortisol-cortisone conversion) and messenger RNA (mRNA) levels in a dose-dependent manner while stimulating reciprocal expression of 11β-HSD1 mRNA and activity (cortisone-cortisol conversion). A similar rise in 11β-HSD1 reductase activity also was observed in primary cultures of OBs treated with 10 ng/ml TNF-α. Pretreatment of MG-63 cells with 0.1 ng/ml IL-1β resulted in increased cellular sensitivity to physiological glucocorticoids as shown by induction of serum and glucocorticoid-inducible kinase (SGK; relative increase with 50 nM F but no IL-1β pretreatment 1.12 ± 0.34; with pretreatment 2.63 ± 0.50; p < 0.01). These results highlight a novel mechanism within bone cells whereby inflammatory cytokines cause an autocrine switch in intracellular corticosteroid metabolism by disabling glucocorticoid inactivation (11β-HSD2) while inducing glucocorticoid activation (11β-HSD1). Therefore, it can be postulated that some of the effects of proinflammatory cytokines within bone (e.g., periarticular erosions in inflammatory arthritis) are mediated by this mechanism.