Glucocorticoids play an important role in determining adipose tissue distribution and function, with glucocorticoid excess states such as Cushing's syndrome resulting in central obesity. We have investigated the functional significance of local generation of cortisol within adipose tissue from inactive cortisone through the activity of the NADP(H)-dependent enzyme, 11beta-hydroxysteroid dehydrogenase type 1 (11betaHSD1). In primary cultures of paired omental (om) and sc human adipose stromal cells (ASC; n = 34), 11betaHSD1 oxo-reductase activity was significantly higher in om ASC (median, 40.2 pmol/mg protein x h; 95% confidence interval, 1.8-105) compared with sc ASC (median, 11.4; 95% confidence interval, 0-48.1; P<0.001) despite similar endogenous NADPH/NADP concentrations. Both cortisol and insulin increased the differentiation of ASC to adipocytes (as assessed by glycerol-3-phosphate dehydrogenase expression), but only cortisol increased 11betaHSD1 activity and messenger RNA levels in a dose-dependent fashion. Cortisone (500 nM) was as effective as 500 nM cortisol in inducing ASC differentiation, but this stimulatory effect was inhibited by coincubation with the 11betaHSD1 inhibitor, glycyrrhetinic acid. The higher local conversion of cortisone to active cortisol through expression of 11betaHSD1 in om compared with sc ASC may explain the specific action of glucocorticoids on different adipose tissue depots. 11betaHSD1 expression in om ASC is regulated at a transcriptional level and is increased by glucocorticoids, but is not entirely dependent upon ASC differentiation. Inhibition of 11betaHSD1 within om ASC inhibits cortisone-induced ASC differentiation. These findings indicate that local metabolism of glucocorticoid may control differentiation of adipose tissue in a site-specific fashion. Specific inhibitors of 11betaHSD1 may offer a novel approach for the treatment of patients with central obesity.