Development of osteoporosis severely complicates long-term glucocorticoid (GC) therapy. Using a Cre-transgenic mouse line, we now demonstrate that GCs are unable to repress bone formation in the absence of glucocorticoid receptor (GR) expression in osteoblasts as they become refractory to hormone-induced apoptosis, inhibition of proliferation, and differentiation. In contrast, GC treatment still reduces bone formation in mice carrying a mutation that only disrupts GR dimerization, resulting in bone loss in vivo, enhanced apoptosis, and suppressed differentiation in vitro. The inhibitory GC effects on osteoblasts can be explained by a mechanism involving suppression of cytokines, such as interleukin 11, via interaction of the monomeric GR with AP-1, but not NF-kappaB. Thus, GCs inhibit cytokines independent of GR dimerization and thereby attenuate osteoblast differentiation, which accounts, in part, for bone loss during GC therapy.