The localized activation of circulating glucocorticoids in vivo by the enzyme 11beta-hydroxysteroid dehydrogenase type 1 (11beta-HSD1) plays a critical role in the development of the metabolic syndrome. However, the precise contribution of 11beta-HSD1 in the initiation of adipogenesis by inactive glucocorticoids is not fully understood. 3T3-L1 fibroblasts can be terminally differentiated to mature adipocytes in a glucocorticoid-dependent manner. Both inactive rodent dehydrocorticosterone and human cortisone were able to substitute for the synthetic glucocorticoid dexamethasone in 3T3-L1 adipogenesis, suggesting a potential role for 11beta-HSD1 in these effects. Differentiation of 3T3-L1 cells caused a strong increase in 11beta-HSD1 protein levels, which occurred late in the differentiation protocol. Reduction of 11beta-HSD1 activity in 3T3-L1 fibroblasts, achieved by pharmacological inhibition or adenovirally mediated delivery of short hairpin RNA constructs, specifically blocked the ability of inactive glucocorticoids to drive 3T3-L1 differentiation. However, even modest increases in exogenous 11beta-HSD1 expression in 3T3-L1 fibroblasts, to levels comparable with endogenous 11beta-HSD1 in differentiated 3T3-L1 adipocytes, were sufficient to block adipogenesis. Luciferase reporter assays indicated that overexpressed 11beta-HSD1 was catalyzing the inactivating dehydrogenase reaction, because the ability of both active and inactive glucocorticoids to activate the glucocorticoid receptor were largely suppressed. These results suggest that the temporal regulation of 11beta-HSD1 expression is tightly controlled in 3T3-L1 cells, so as to mediate the initiation of differentiation by inactive glucocorticoids and also to prevent the inhibitory activity of prematurely expressed 11beta-HSD1 during adipogenesis.