Stress and glucocorticoid hormones regulate hippocampal neurogenesis, but the molecular mechanisms mediating these effects are poorly understood. Here we identify the glucocorticoid receptor (GR) target gene, serum- and glucocorticoid-inducible kinase 1 (SGK1), as one such mechanism. Using a human hippocampal progenitor cell line, we found that a small molecule inhibitor for SGK1, GSK650394, counteracted the cortisol-induced reduction in neurogenesis. Moreover, gene expression and pathway analysis showed that inhibition of the neurogenic Hedgehog pathway by cortisol was SGK1-dependent. SGK1 also potentiated and maintained GR activation in the presence of cortisol, and even after cortisol withdrawal, by increasing GR phosphorylation and GR nuclear translocation. Experiments combining the inhibitor for SGK1, GSK650394, with the GR antagonist, RU486, demonstrated that SGK1 was involved in the cortisol-induced reduction in progenitor proliferation both downstream of GR, by regulating relevant target genes, and upstream of GR, by increasing GR function. Corroborating the relevance of these findings in clinical and rodent settings, we also observed a significant increase of SGK1 mRNA in peripheral blood of drug-free depressed patients, as well as in the hippocampus of rats subjected to either unpredictable chronic mild stress or prenatal stress. Our findings identify SGK1 as a mediator for the effects of cortisol on neurogenesis and GR function, with particular relevance to stress and depression.