A central feature of glucocorticoid (GC)-induced osteoporosis is decreased bone formation, secondary to decreased numbers of functional osteoblasts. We find that ERK activity is essential for serum-induced osteoblast proliferation in vitro because inhibition of MAPK/ERK kinase activity by U0126 completely abolished both serum-induced activation of ERK and proliferation of mouse (MBA-15.4) and human (MG-63) osteoblast cell lines. Dexamethasone (Dex) rapidly (<2 h) inhibits the sustained phase of ERK activation, required for nuclear shift and mitogenesis. This inhibition is reversed by cotreatment with the protein synthesis inhibitor, cycloheximide, and by the GC receptor antagonist, RU486, suggesting a classical transcriptional mechanism. Phosphatase activity was up-regulated by Dex treatment, and inhibition of ERK activity by Dex was also reversed by the protein tyrosine phosphatase inhibitor, vanadate. Coupled with the rapidity of Dex action, this indicates immediate-early gene phosphatase involvement, and we therefore used quantitative, real-time PCR to examine expression profiles of the dual-specificity MAPK phosphatases, MKP-1 and MKP-3. MKP-1, but not MKP-3, mRNA expression was 10-fold up-regulated in both mouse and human osteoblast cell lines within 30 min of Dex treatment and remained elevated for 24 h. MKP-1 protein was also markedly up-regulated following 1-8 h of Dex treatment, and this correlated precisely with dephosphorylation of ERK. Cell proliferation was impaired by Dex treatment, and this was reversed by both RU486 and vanadate. Therefore, MKP-1 up-regulation provides a novel and rapid mechanism, whereby GCs inhibit osteoblast proliferation.