We analyzed glucocorticoid receptor function using ligand binding assays, DNA band-shift analysis and trans-activation of the murine mammary tumor virus-thymidine kinase-chloramphenicol acetyltransferase reporter gene in transiently transfected MG-63 human osteosarcoma cells. Dexamethasone increased the distribution of MG-63 cells in the G(1)/G(0) phase of the cell cycle, thus decreasing the rate of DNA synthesis and cell growth. Its effect on MG-63 cell growth was neutralized by RU486 and anti-transforming growth factor beta I (TGF beta I) antibody. In addition, (i) dexamethasone increased the levels of active TGF beta I in MG-63-conditioned media without significantly altering the expression of TGF beta I mRNA in MG-63 cells and (ii) TGF beta I inhibited proliferation of MG-63 cells. Therefore, we conclude that glucocorticoid receptor function is mediated by the activation of latent-TGF beta I in MG-63 osteosarcoma cells. (C) 1995 Wiley-Liss, Inc.