Transforming growth factor-beta (TGF beta) is a multifunctional growth factor in bone that is secreted as a latent complex and must be activated in order to influence cellular activity. We have investigated the influence of dexamethasone (Dex; a potent glucocorticoid) on the secretion and activation of latent TGF beta by normal human osteoblast-like cells (hOBs). Dex had no significant effect on TGF beta mRNA or total protein production, but treatment with Dex resulted in a steroid dose-dependent activation of up to 90% of the TGF beta produced by the hOBs. Dex-treated hOBs activated multiple latent forms of TGF beta. Conditioned medium from Dex-treated hOBs retained the ability to activate latent TGF beta when incubated at 37 C in the absence of cells. Unlike other cell systems, Dex-induced hOB-mediated TGF beta activation did not involve binding to the mannose-6-phosphate receptor. However, the activation was prevented by treatment of hOB cells with microtubual disrupting agents, by the addition of protease inhibitors, or by weak base treatment of the medium. Dex treatment of hOBs was shown to induce a dose-dependent increase in the mRNA levels of cathepsin-B and -D and in the levels of cathepsin-B protein secreted by the cells. Taken together, these data suggest that Dex treatment of hOBs induces the production and secretion of lysosomal proteases that, when secreted, activate latent TGF beta which is secreted by the hOB cells. There is evidence for an involvement of more than one type of protease in this activation process. This activation of TGF beta may, therefore, play a role in glucocorticoid regulation of bone cell functions. Furthermore, TGF beta is most likely involved in autocrine and paracrine effects on bone cells.