Glucocorticoid-induced osteoporosis (GIO) is the most common form of secondary osteoporosis. As glucocorticoids (GC) act on most tissues, the cellular and molecular mechanisms of GC induced bone loss were not known for a long time. Genome wide studies of DNA binding by the GC receptor, the GR, and celltype specific and function-selective deletions of the GR have recently revolutionized our understanding of GC action in bone. After nuclear translocation the GR regulates gene expression by binding as a monomer or dimer directly or indirectly to DNA. There are now multiple lines of evidence that GC actions on bone are mainly mediated directly by the bone cells i. e. osteoclasts, osteoblasts and osteocytes. GC treatment can induce osteoclast activity and cause high rates of bone resorption but the effect of GR signaling on osteoclast development and function still remains controversial. Osteocytes have been shown to be very sensitive to GC-induced apoptosis. Nonetheless, the major cause of bone loss in GIO appears to be the impairment of osteoblast function which in fact takes place at several levels. GC induce apoptosis and inhibit osteoblast proliferation. Most importantly they also inhibit the differentiation of osteoblasts from mesenchymal progenitor cells. GC lead to the enhancement of adipogenesis at the cost of osteoblast development. Whether this takes place at the same level of progenitor cells still remains to be elucidated, however. High dose GC exposure of bone cells leads to interference with pro-osteogenic signaling, such as the Wnt pathway. GR monomer-dependent gene expression programs seem to be decisive here. miRNAs have also been shown to influence the bone integrity but at least in GIO they appear to play a minor role. Despite substantial progress of understanding molecular mechanisms underlying GIO, some questions remain unanswered. Current challenges in GIO research are i) the understanding of physiological anabolic effects of low dose GCs, ii) the clear definition of the osteoblast and osteoclast differentiation stages that are vulnerable to pharmacological GCs in vivo and iii) the identification of novel drug targets, enhancing osteoblast function to overcome the deleterious effects of GCs on bone. Novel high-throughput screening methods for primary cells and facilitated genetic manipulation for rodent models offer a promising outlook for this challenging task.