Leydig cells from mature rat testes contain high levels of 11 beta-hydroxysteroid dehydrogenase (11HSD), an enzyme that oxidatively inactivates glucocorticoids. We have proposed that the 11HSD of Leydig cells protects the testis from the effects of high levels of glucocorticoids, as may occur in stress and Cushing's disease. In this paper we investigate whether testicular 11HSD by inactivating glucocorticoids diminishes their ability to inhibit testosterone (T) production. Corticosterone (B) and dexamethasone (DEX) inhibited T production by purified Leydig cells in a dose-dependent manner. Activity was diminished by 50% with 1.5 nM DEX vs. 0.4 microM B. The shapes of the inhibition curves were consistent with a saturable process; inhibition by both steroids was overcome with the glucocorticoid receptor antagonist RU486. We concluded that the effect was mediated by glucocorticoid receptors. Aldosterone, 11 beta-hydroxyprogesterone, and 11-deoxycorticosterone did not decrease T production. The greater potency of DEX compared to B may be due to its resistance to oxidative inactivation by 11HSD. As 11-dehydrocorticosterone, the product of the oxidation of B by 11HSD, did not inhibit T production, it was predicted that inactivation of 11HSD should enhance the inhibitory effect of B. Consistent with this prediction, inhibition by B was increased by carbenoxolone, an inhibitor of 11HSD, becoming more similar to that by DEX. Suppression of T production by DEX (which is not a substrate of 11HSD) was unaffected by carbenoxolone. We conclude that through reduction of the levels of inhibitory glucocorticoids, 11HSD has a novel role among Leydig cell steroid-metabolizing enzymes in the regulation of T production.