Glucocorticoids have potent anti-inflammatory effects and have been used to treat patients with rheumatoid arthritis for more than 60 years. However, severe adverse effects of glucocorticoid treatment, including loss of bone mass and increased risk of fractures, are common. Data from studies of glucocorticoid-mediated gene regulation, which utilized conditional knockout mice in animal models of arthritis or glucocorticoid-induced osteoporosis, have substantially increased our understanding of the mechanisms by which glucocorticoids act via the glucocorticoid receptor. Following glucocorticoid binding, the receptor regulates gene expression either by interacting with DNA-bound transcription factors as a monomer or by binding directly to DNA as a dimer. In contrast to the old hypothesis that transrepression mechanisms involving monomeric glucocorticoid receptor actions were responsible for the anti-inflammatory effects of glucocorticoids, whereas dimeric glucocorticoid receptor binding resulted in adverse effects, data from animal models have shown that the anti-inflammatory and adverse effects of glucocorticoids are mediated by both monomeric and dimeric glucocorticoid receptor binding. This improved knowledge of the molecular mechanisms that underlie the beneficial and adverse effects of glucocorticoid therapy might lead to the development of rationales for novel glucocorticoid receptor ligands that could potentially have anti-inflammatory efficacy without adverse effects on bone.