To determine the role of endogenous glucocorticoids in bone, we previously developed transgenic mice in which a 2.3 kb fragment of the Col1a1 promoter drives 11beta-hydroxysteroid dehydrogenase 2 expression in mature osteoblasts. This transgene should inactivate glucocorticoids upstream of all receptor signaling pathways. In the present study, we show that femoral cortical bone area and thickness were approximately 10-15% lower in transgenic mice than in wild-type littermates. Femur length was unchanged, indicating that bone elongation was not affected in this model. Expression of osteocalcin mRNA, pOBCol2.3-GFP (a green fluorescent protein marker of mature osteoblasts), and the formation of mineralized nodules were impaired in ex vivo transgenic primary calvarial cultures. The extent of crystal violet staining in bone marrow cultures, indicative of the number of adherent stromal cells, was also decreased. These data suggest that endogenous glucocorticoids are required for cortical bone acquisition and full osteoblast differentiation. It appears that blocking glucocorticoid signaling in vivo leads to a decrease in the commitment and/or expansion of progenitors entering the osteoblast lineage.