1. Glucocorticoids are widely used for the suppression of inflammation in chronic inflammatory diseases such as asthma, rheumatoid arthritis, inflammatory bowel disease and autoimmune diseases, all of which are associated with increased expression of inflammatory genes. The molecular mechanisms involved in this anti-inflammatory action of glucocorticoids is discussed, particularly in asthma, which accounts for the highest clinical use of these agents. 2. Glucocorticoids bind to glucocorticoid receptors in the cytoplasm which then dimerize and translocate to the nucleus, where they bind to glucocorticoid response elements (GRE) on glucocorticoid-responsive genes, resulting in increased transcription. Glucocorticoids may increase the transcription of genes coding for anti-inflammatory proteins, including lipocortin-1, interleukin-10, interleukin-1 receptor antagonist and neutral endopeptidase, but this is unlikely to account for all of the widespread anti-inflammatory actions of glucocorticoids. 3. The most striking effect of glucocorticoids is to inhibit the expression of multiple inflammatory genes (cytokines, enzymes, receptors and adhesion molecules). This cannot be due to a direct interaction between glucocorticoid receptors and GRE, as these binding sites are absent from the promoter regions of most inflammatory genes. It is more likely to be due to a direct inhibitory interaction between activated glucocorticoid receptors and activated transcription factors, such as nuclear factor-kappa B and activator protein-1, which regulate the inflammatory gene expression. 4. It is increasingly recognized that glucocorticoids change the chromatin structure. Glucocorticoid receptors also interact with CREB-binding protein (CBP), which acts as a co-activator of transcription, binding several other transcription factors that compete for binding sites on this molecule. Increased transcription is associated with uncoiling of DNA wound around histone and this is secondary to acetylation of the histone residues by the enzymic action of CBP. Glucocorticoids may lead to deacetylation of histone, resulting in tighter coiling of DNA and reduced access of transcription factors to their binding sites, thereby suppressing gene expression. 5. Rarely patients with chronic inflammatory diseases fail to respond to glucocorticoids, although endocrine function of steroids is preserved. This may be due to excessive formation of activator protein-1 at the inflammatory site, which consumes activated glucocorticoid receptors so that they are not available for suppressing inflammatory genes. 6. This new understanding of glucocorticoid mechanisms may lead to the development of novel steroids with less risk of side effects (which are due to the endocrine and metabolic actions of steroids). 'Dissociated' steroids which are more active in transrepression (interaction with transcription factors) than transactivation (GRE binding) have now been developed. Some of the transcription factors that are inhibited by glucocorticoid, such as nuclear factor-kappa B, are also targets for novel anti-inflammatory therapies.