Recent human epidemiological studies have linked low birth weight with a substantially increased risk of non-insulin-dependent diabetes mellitus in later life. These data suggest that the intrauterine environment plays a crucial role in determining later glucose homeostasis, but the mechanism is unknown. We have proposed that exposure of the fetus to excess maternal glucocorticoids may underpin the epidemiological findings. Normally placental 11 beta-hydroxysteroid dehydrogenase type 2 (11 beta-HSD-2) protects the fetus from the normally higher maternal levels of glucocorticoids by inactivating corticosterone and cortisol to inert 11-keto products. Here we show that administration of carbenoxolone, an inhibitor of placental 11 beta-HSD 2, to pregnant rats, leads to a significant reduction in average birth weight (20% fall). At 6 months of age, the male offspring of carbenoxolone-treated pregnancies had similar weights to controls, but showed significantly higher fasting plasma glucose (6.0 +/- 0.3 vs 4.8 +/- 0.2 mmol/l; p < 0.01) and exhibited significantly greater plasma glucose (10% higher) and insulin (38% higher) responses to an oral glucose load. These effects of carbenoxolone require intact maternal adrenal glands suggesting that inhibition of feto-placental 11 beta-HSD 2 is key. These data support the notion that deficiency of placental 11 beta-HSD, by exposing the fetus to excess maternal glucocorticoids, reduces growth and predisposes to hyperglycaemia in later life.