Supraphysiological levels of cortisol inhibit bone cell replication and matrix synthesis, but its mechanism of action is unknown and could be secondary to an inhibition of local growth factor synthesis. These inhibitory effects of cortisol are the converse of the observed anabolic influences of the endogenously produced insulin-like growth factor-I (IGF-I); therefore, cortisol was examined for its effect on the production of IGF-I in osteoblast (Ob)- and fibroblast/preosteoblast-enriched cell cultures prepared from fetal rat parietal bone. Synthesis of IGF-I was monitored by Northern blot analysis to determine steady state IGF-I mRNA levels and by an IGF-I-specific RIA to quantitate polypeptide levels in acidified and fractionated culture medium. Cortisol at 100 nM decreased IGF-I transcript levels by 60% or more in Ob cultures within 6 h of treatment, and the concentration of immunoreactive IGF-I by 50% after 24 h; these effects were observed in the absence of a change in cellular DNA content. In Ob cultures, PTH at 10 nM increased IGF-I transcripts at 6 h and polypeptide levels at 24 h by 2.5- and 4.1-fold, respectively, and cortisol opposed this effect. The inhibitory effect of cortisol was not specific for the Ob cell population, since at 100 nM it also decreased IGF-I transcript and immunoreactive IGF-I levels in fibroblast/preosteoblast cultures and opposed the stimulation of IGF-I synthesis after treatment with 100 ng/ml GH. In conclusion, high levels of cortisol decrease skeletal IGF-I synthesis by reducing IGF-I transcript levels, and this effect probably contributes to the inhibitory influence of cortisol on bone formation.