To investigate the contribution of the glucocorticoid receptor (GR) in skin development and the mechanisms underlying this function, we have analyzed two mouse models in which GR has been functionally inactivated: the knockout GR(-/-) mice and the dimerization mutant GR(dim/dim) that mediates defective DNA binding-dependent transcription. Because GR null mice die perinatally, we evaluated skin architecture of late embryos by histological, immunohistochemical, and electron microscopy studies. Loss of function of GR resulted in incomplete epidermal stratification with dramatically abnormal differentiation of GR(-/-), but not GR(+/-) embryos, as demonstrated by the lack of loricrin, filaggrin, and involucrin markers. Skin sections of GR(-/-) embryos revealed edematous basal and lower spinous cells, and electron micrographs showed increased intercellular spaces between keratinocytes and reduced number of desmosomes. The absent terminal differentiation in GR(-/-) embryos correlated with an impaired activation of caspase-14, which is required for the processing of profilaggrin into filaggrin at late embryo stages. Accordingly, the skin barrier competence was severely compromised in GR(-/-) embryos. Cultured mouse primary keratinocytes from GR(-/-) mice formed colonies with cells of heterogeneous size and morphology that showed increased growth and apoptosis, indicating that GR regulates these processes in a cell-autonomous manner. The activity of ERK1/2 was constitutively augmented in GR(-/-) skin and mouse primary keratinocytes relative to wild type, which suggests that GR modulates skin homeostasis, at least partially, by antagonizing ERK function. Moreover, the epidermis of GR(+/dim) and GR(dim/dim) embryos appeared normal, thus suggesting that DNA-binding-independent actions of GR are sufficient to mediate epidermal and hair follicle development during embryogenesis.