Alterations in the laterality of cortical activity have been shown in depressive illnesses. One possible pathophysiological mechanism for this is an effect of corticosteroids. We have previously demonstrated that endogenous cortisol concentrations correlate with the asymmetry of cortical activity related to episodic memory in healthy subjects and depressed patients. To further-examine whether this is due to a causal effect of cortisol on the laterality of episodic memory, we studied the effect of exogenous administration of cortisol in healthy subjects. Twenty-three right-handed healthy male volunteers were tested in a double-blind cross-over study. Event-related potentials (ERPs) were recorded during an episodic memory task following a four-day course of 160mg/day cortisol or placebo. Low-resolution brain electromagnetic tomography (LORETA) was used to identify brain regions involved in the neurocognitive task. Cortisol levels were measured in saliva samples. ERP and LORETA analysis following placebo demonstrated significant left parahippocampal activation associated with successful retrieval. Cortisol led to a decrease in the mean early frontal ERP voltage and an increase in the late right ERP voltage. LORETA suggested this to be due to a significant increased late activation of the right superior frontal gyrus. There was no significant effect of cortisol on episodic memory performance. This study suggests that exogenous cortisol leads to more positive-going waveforms over the right than the left hemisphere, possibly due to increased monitoring of the products of retrieval. The results support the hypothesis of causal effects of cortisol on the laterality of cortical activity occurring during an episodic memory task.