We have reported a high expression of IGF-I in pancreatic islet β-cells of transgenic mice under the metallothionein promoter. cDNA microarray analysis of the islets revealed that the expression of 82 genes was significantly altered compared to wild-type mice. Of these, 11β-hydroxysteroid dehydrogenase 1 (11β-HSD1), which is responsible for the conversion of inert cortisone (11-dehydrocorticosterone, DHC in rodents) to active cortisol (corticosterone) in the liver and adipose tissues, has not been identified previously as an IGF-I target in pancreatic islets. We characterized the changes in its protein level, enzyme activity and glucose-stimulated insulin secretion. In freshly isolated islets, the level of 11β-HSD1 protein was significantly lower in MT-IGF mice. Using dual-labeled immunofluorescence, 11β-HSD1 was observed exclusively in glucagon-producing, islet α-cells but at a lower level in transgenic vs. wild-type animals. MT-IGF islets also exhibited reduced enzymatic activities. Dexamethasone (DEX) and DHC inhibited glucose-stimulated insulin secretion from freshly isolated islets of wild-type mice. In the islets of MT-IGF mice, 48-h pre-incubation of DEX caused a significant decrease in insulin release, while the effect of DHC was largely blunted consistent with diminished 11β-HSD1 activity. In order to establish the function of intracrine glucocorticoids, we overexpressed 11β-HSD1 cDNA in MIN6 insulinoma cells, which together with DHC caused apoptosis and a significant decrease in proliferation. Both effects were abolished with the treatment of an 11β-HSD1 inhibitor. Our results demonstrate an inhibitory effect of IGF-I on 11β-HSD1 expression and activity within the pancreatic islets, which may mediate part of the IGF-I effects on cell proliferation, survival and insulin secretion.