Elucidating the role of glucocorticoid in regulating gene expression is crucial to developing effective strategies against inflammatory diseases such as arthritis. In this report we demonstrate that glucocorticoid inhibits transcription directed by the IL-lbeta gene (IL1B) upstream induction sequence (UIS) enhancer, and to a much lesser extent by the tissue-specific basal promoter. Within the enhancer, three transcription factor binding sites, previously demonstrated by us to be important for the induction of IL1B by lipopolysaccharide, are now shown to be directly inhibited by the synthetic glucocorticoid, dexamethasone. We also previously showed that one of these sites could bind a novel STAT-like factor, while the other two bound heterodimers containing NF-IL6(C/EBPbeta). Although it has been reported by others that NF-IL6 homodimers can interact with glucocorticoid receptor (GR) to enhance transcription of the alpha1-acid glycoprotein gene, it now appears that glucocorticoid represses DNA binding of NF-IL6 heterodimers as well as the novel STAT-like factor to the critical sites within the IL1B UIS. Thus, GR likely disrupts the DNA binding capability of critical IL1B factors via transrepression.