Although it has been clearly established that glucocorticoids inhibit mitogen- or antigen-induced lymphocyte proliferation, the mechanism underlying this effect has remained ill-defined. Recently, it has become evident that T cell proliferation is mediated by a soluble T cell growth factor (TCGF) released by mitogen/antigen stimulated T cells. Therefore it seemed probable that the inhibitory effects of glucocorticoids were manifested either at the level of TCGF production or at the level of the activated T lymphocyte. We found that differentiated cytolytic T lymphocytes harvested from TCGF-dependent long-term culture were only mildly sensitive to inhibitory effects (25 to 30% inhibition) of glucocorticoids as measured by decreased cellular proliferation and the incorporation of tritiated thymidine. The degree of inhibition observed was most probably mediated through glucocorticoid receptors in that the half maximal inhibitory glucocorticoid concentration correlated with half-maximal glucocorticoid receptor saturation. In contrast, we found that mitogen-induced TCGF production and T cell proliferation were completely inhibited by pharmacologic concentrations of dexamethasone (10-6 M). Finally, the TCGF supplementation of mitogen-stimulated cultures treated with maximal inhibitory concentrations of dexamethasone resulted in complete amelioration of glucocorticoid suppression. These results indicate that a major mechanism of glucocorticoid-mediated immunosuppression may occur at the level of the TCGF-producing cell, resulting in the control of clonal expansion of activated T cells via inhibition of TCGF production.