Glucocorticoids inhibit the proliferation of fibroblastic cells in vivo and in culture; however, the molecular mechanism that accounts for this effect has remained obscure. We have undertaken to elucidate the mechanism whereby glucocorticoids decrease the rate of proliferation of mouse L929 fibroblastic cells. Addition of dexamethasone to mid-log phase fibroblasts prolongs G1 phase. This increase in the G1 interval is associated with, and probably due to, inhibition of phosphorylation of the product of the Rb-1 tumor suppressor gene, pRb. Inhibition of pRb phosphorylation by cyclin D-dependent kinases can be demonstrated in vitro. Nevertheless, there is no detectable change in the expression of cyclin D1, cyclin D2, or cyclin D3. Cyclin-dependent kinase-4 (Cdk4) and Cdk6 are not down-regulated in L929 cells after addition of glucocorticoids, and the abundance of cyclin D/Cdk4 complexes does not change. Inhibition of pRb kinase activity is associated with an increase in the abundance of one of the Cdk inhibitors, p21Cip1. The abundance of another cyclin kinase inhibitor, p27Kip1, remains constant. The amount of Cdk4 that is bound to p21Cip1 increases rapidly after addition of dexamethasone, and the activity of Cdk4-pRb kinase decreases in parallel. These results indicate that glucocorticoid inhibition of fibroblast proliferation is due to induction of p21Cip1, which binds to and inactivates cyclinD/Cdk4 complexes. The abundance of p21 mRNA increases about 5-fold within 2 h after addition of dexamethasone. This effect does not obtain in L929 mutants that are null for the glucocorticoid receptor, and a variant that expresses the glucocorticoid receptor from a tetracycline-repressible expression vector demonstrates induction of p21 mRNA only in the absence of tetracycline. Cycloheximide does not block induction of p21 mRNA, and dexamethasone has no detectable effect on the apparent rate of degradation of p21 mRNA. Nuclear run-on transcription of the Cip1 gene increases within 2 h after addition of dexamethasone. This effect can be blocked by tetracycline-mediated repression of the glucocorticoid receptor.