Glucocorticoids inhibit proliferation of many cell types, but the relationship between the glucocorticoid receptor (GR) and the proteins regulating cell cycle progression is not fully understood. We previously found that during fibrosarcoma (FS) progression, GR displays only modest transcriptional activity in the preneoplastic stages, whereas it is highly active in FS cells. Now, we report that glucocorticoids reduce proliferation throughout FS development. The cyclin-dependent kinase inhibitor p16(INK4a) is frequently absent in many cancers, including FSs. We observed that p16(INK4a) protein expression is lost at the tumor stage of FS progression. Treatment with the demethylating agent 5-aza-2'-deoxycytidine restores p16(INK4a) expression and reverts the phenotype of FS cells to low GR transcriptional activity, similar to that of the p16(INK4a)-expressing preneoplastic stages. Importantly, exogenous p16(INK4a) introduced by cotransfection is sufficient to reduce GR activity in FS cells, without affecting GR activity in p16-positive aggressive fibromatosis cells. Furthermore, GR transcriptional activity is elevated in mouse embryo fibroblasts derived from INK4a(-/-) mice compared with those derived from WT mice, implying that the difference in p16(INK4a) expression is sufficient to modulate GR activity. These results suggest a relationship between steroid hormone receptor activity and cell cycle inhibition, whereby absence of p16(INK4a) protein leads to higher GR transactivation activity and reduced cell sensitivity to dexamethasone. This observation might have important implications for current cancer therapies.