Glucocorticoids (GCs) are widely used in the treatment of allergic skin conditions despite having numerous side effects. Here we use Cre/loxP-engineered tissue- and cell-specific and function-selective GC receptor (GR) mutant mice to identify responsive cell types and molecular mechanisms underlying the antiinflammatory activity of GCs in contact hypersensitivity (CHS). CHS was repressed by GCs only at the challenge phase, i.e., during reexposure to the hapten. Inactivation of the GR gene in keratinocytes or T cells of mutant mice did not attenuate the effects of GCs, but its ablation in macrophages and neutrophils abolished downregulation of the inflammatory response. Moreover, mice expressing a DNA binding-defective GR were also resistant to GC treatment. The persistent infiltration of macrophages and neutrophils in these mice is explained by an impaired repression of inflammatory cytokines and chemokines such as IL-1beta, monocyte chemoattractant protein-1, macrophage inflammatory protein-2, and IFN-gamma-inducible protein 10. In contrast TNF-alpha repression remained intact. Consequently, injection of recombinant proteins of these cytokines and chemokines partially reversed suppression of CHS by GCs. These studies provide evidence that in contact allergy, therapeutic action of corticosteroids is in macrophages and neutrophils and that dimerization GR is required.