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The glucocorticoid receptor (GR) is a major control factor for proliferation, differentiation, and inflammation. Our knowledge about the GR is focused on its function as a transcription regulator. However, cells do not always respond to steroids in the same way or develop resistance. The mechanism underlying such a modified steroid response is not well understood, and may depend on the microenvironment of the cells or on the stage of their differentiation. Therefore, we studied the effect of cell density and inflammatory conditions on the expression, compartmentalization, activation, and the anti-proliferative function of the GR in primary human lung fibroblast cultures. In subconfluent cells the GR was located perinuclear, while in confluent cells it was ubiquitously expressed. Serum stimulation up-regulated the level of GR mRNA and protein under all conditions. In subconfluent cells dexamethasone activated the nuclear accumulation and DNA binding of the GR persistently, while in confluent cells its activity declined after 6 hours. In subconfluent cells, but not in confluent cells, the GR interacted with a 42-kD, but not the 30-kD C/EBP-alpha isoprotein, which resulted in an up-regulation of p21((Waf1/Cip1)) expression and suppression of proliferation. In confluent cells, glucocorticoids induced p27((Kip1)) expression via p38 mitogen-activated protein kinase and a 52-kD C/EBP-beta isoprotein. However, p27((Kip1)) did not mediate the antiproliferative effect of glucocorticoids, but simultaneous inhibition of p21((Waf1/Cip1)) and p27((Kip1)) unlocked contact inhibition in confluent cells. Our results indicate that cell density and serum exposure alter the localization and function of the GR.