Adult neurogenesis, the birth of new neurons in the mature brain, has attracted considerable attention in the last decade. One of the earliest identified and most profound factors that affect adult neurogenesis both positively and negatively is stress. Here, we review the complex interplay between stress and adult neurogenesis. In particular, we review the role of the glucocorticoid receptor, the main mediator of the stress response in the proliferation, differentiation, migration, and functional integration of newborn neurons in the hippocampus. We review a multitude of mechanisms regulating glucocorticoid receptor activity in relationship to adult neurogenesis. We postulate a novel concept in which the level of glucocorticoid receptor expression directly regulates the excitation-inhibition balance, which is key for proper neurogenesis. We furthermore argue that an excitation-inhibition dis-balance may underlie aberrant functional integration of newborn neurons that is associated with psychiatric and paroxysmal brain disorders.