This review examines the putative link between glucocorticoid and hippocampal abnormalities in posttraumatic stress disorder (PTSD). Increased glucocorticoid receptor (GR) sensitivity in PTSD may permit enhanced negative feedback inhibition of cortisol at the pituitary, hypothalamus, or other brain regions comprising the hypothalamic-pituitary-adrenal (HPA) axis and would be expected to affect other physiological systems that are regulated by glucocorticoids. Molecular and transcriptional studies of cortisol are consistent with the hypothesis that cortisol actions may be amplified in PTSD as a result of enhanced GR sensitivity in monocytes and some brain regions, although cortisol levels themselves are unchanged and oftentimes lower than normal. Concurrently, magnetic resonance imaging studies have demonstrated that individuals with PTSD have smaller hippocampal volume than individuals without PTSD. Initial hypotheses regarding the mechanism underlying hippocampal alterations in PTSD focused on elevated glucocorticoid levels in combination with extreme stress as the primary cause, but this explanation has not been well supported in human studies. Lack of data from neuroimaging studies preclude a firm link between PTSD onset and hippocampal volume changes. Rather, the available evidence is consistent with the possibility that smaller hippocampal volume (like reduced cortisol levels and enhanced GR sensitivity) may be a vulnerability factor for developing the disorder; limitations of hippocampal-based models of PTSD are described. We further review neuroimaging studies examining hippocampal structure and function following manipulation of glucocorticoid levels and also examining changes in the hippocampus in relationship to other brain regions. Evidence that the GR may be an important therapeutic target for the treatment of PTSD, especially for functions subserved by the hippocampus, is discussed. Implications of the current review for future research are described, with an emphasis on the need to integrate findings of glucocorticoid abnormalities with functional-imaging paradigms to formulate a comprehensive model of HPA-axis functioning in PTSD.