Previous data have suggested that glucocorticoids (GCs) are involved in the differentiation of thymocytes into mature T cells. In this report we demonstrate that the mouse thymic epithelial cells (TEC) express the cytochrome P450 hydroxylases Cyp11A1, Cyp21, and Cyp11B1. These enzymes, in combination with 3β-hydroxysteroid dehydrogenase (3βHSD), convert cholesterol into corticosterone, the major GC in rodents. In addition, when TEC were cocultured with ‘reporter cells’ containing the glucocorticoid receptor (GR) and a GR-dependent reporter gene, a specific induction of reporter gene activity was observed. Induction of reporter gene activity was blocked when the TEC and reporter cells were incubated in the presence of the Cyp11B1 inhibitor metyrapone or the 3βHSD inhibitor trilostane, as well as by the GR antagonist RU486. Coculturing of TEC with thymocytes induced apoptosis in the latter, which was partially blocked by the enzyme inhibitors and RU486. We conclude that TEC secrete a GC hormone activity and suggest a paracrine role for this in thymocyte development.-Pazirandeh, A., Xue, Y., Rafter, I., Sjövall, J., Jondal, M., Okret, S. Paracrine glucocorticoid activity produced by mouse thymic epithelial cells.