The Ca(2+)- and phospholipid-binding protein Anx-A1 (annexin 1; lipocortin 1) has been described both as an inhibitor of phospholipase A(2) (PLA(2)) activity and as a mediator of glucocorticoid-regulated cell growth and eicosanoid generation. Here we show that, when compared with Anx-A1(+/+) cells, lung fibroblast cell lines derived from the Anx-A1(-/-) mouse exhibit an altered morphology characterized by a spindle-shaped appearance and an accumulation of intracellular organelles. Unlike their wild-type counterparts, Anx-A1(-/-) cells also overexpress cyclo-oxygenase 2 (COX 2), cytosolic PLA(2) and secretory PLA(2) and in response to fetal calf serum, exhibit an exaggerated release of eicosanoids, which is insensitive to dexamethasone (10(-8)- 10(-6) M) inhibition. Proliferation and serum-induced progression of Anx-A1(+/+) cells from G(0)/G(1) into S phase, and the associated expression of extracellular signal-regulated kinase 2 (ERK2), cyclin-dependent kinase 4 (cdk4) and COX 2, is strongly inhibited by dexamethasone, whereas Anx-A1(-/-) cells are refractory to the drug. Loss of the response to dexamethasone in Anx-A1(-/-) cells occurs against a background of no apparent change in glucocorticoid receptor expression or sensitivity to non-steroidal anti-inflammatory drugs. Taken together, these observations suggest strongly that Anx-A1 functions as an inhibitor of signal-transduction pathways that lead to cell proliferation and may help to explain how glucocorticoids regulate these processes.