Modulation of gene expression by glucocorticoids involves interaction of these hormones with an intracellular receptor followed by 'transformation' of the hormone-receptor complex into a nuclear binding form. The molecular basis for the antiglucocorticoid action of high-affinity steroid analogues such as RU486 remains controversial. The effects of dexamethasone and RU486 on in vitro and in vivo properties of the receptor were compared using human lymphoblastoid IM-9 cells. In these cells, RU486 fully antagonized the glucocorticoid-specific induction of 5'-nucleotidase activity by dexamethasone. In vitro, however, RU486-bound receptor could be transformed and shown to interact specifically with cloned DNA fragments containing glucocorticoid response elements. These fragments included one from the mouse mammary tumour virus and two from the human growth hormone gene. In vivo, RU486-bound receptor did not behave like dexamethasone-bound receptor. While receptor downregulation, a property of the transformed receptor, was achieved by dexamethasone, this did not occur with RU486. Likewise, RU486 did not affect receptor half-life under conditions when this was shortened by dexamethasone. These seemingly contradictory results can be reconciled by proposing that receptor transformation by agonists involves dissociation of the receptor oligomer to reveal a DNA-binding site that pre-exists on this protein. Although cell-free receptor dissociation and therefore DNA binding can occur even when the receptor is bound to RU486, this steroid maintains receptors in the untransformed state in the intact cell and therefore behaves a glucocorticoid antagonist in vivo.