Amyloid precursor protein (APP) mis-processing and aberrant tau hyperphosphorylation are causally related to the pathogenesis and neurodegenerative processes that characterize Alzheimer's disease (AD). Abnormal APP metabolism leads to the generation of neurotoxic amyloid beta (Abeta), whereas tau hyperphosphorylation culminates in cytoskeletal disturbances, neuronal dysfunction and death. Many AD patients hypersecrete glucocorticoids (GC) while neuronal structure, function and survival are adversely influenced by elevated GC levels. We report here that a rat neuronal cell line (PC12) engineered to express the human ortholog of the tau protein (PC12-htau) becomes more vulnerable to the toxic effects of either Abeta or GC treatment. Importantly, APP metabolism in GC-treated PC12-htau cells is selectively shifted towards increased production of the pro-amyloidogenic peptide C99. Further, GC treatment results in hyperphosphorylation of human tau at AD-relevant sites, through the cyclin-dependent kinase 5 (E.C. 2.7.11.26) and GSK3 (E.C. 2.7.11.22) protein kinases. Pulse-chase experiments revealed that GC treatment increased the stability of tau protein rather than its de novo synthesis. GC treatment also induced accumulation of transiently expressed EGFP-tau in the neuronal perikarya. Together with previous evidence showing that Abeta can activate cyclin-dependent kinase 5 and GSK3, these results uncover a potential mechanism through which GC may contribute to AD neuropathology.