Administration of TGF-beta, a fibrogenic inflammatory growth factor, promotes fibrosis and scarring. Dexamethasone, an anti-inflammatory steroid, inhibits wound healing and reduces fibrosis. The current studies were initiated to determine whether the co-administration of dexamethasone was able to abrogate the fibrogenic effect of TGF-beta. Polyvinyl alcohol sponges were implanted subcutaneously on the abdominal area of rats and directly injected with vehicle, dexamethasone, TGF-beta, or dexamethasone plus TGF-beta. Dexamethasone was able to block the fibrogenic effect of TGF-beta. Collagen and noncollagen protein synthesis was measured as a function of TGF-beta or dexamethasone concentrations in fibroblasts isolated from granulation tissue. Addition of dexamethasone to cultures treated simultaneously with TGF-beta blocked the fibrogenic response of TGF-beta. To study the molecular regulation of collagen gene expression by TGF-beta or dexamethasone, fibroblasts derived from granulation tissue were stably transfected with the ColCat 3.6 plasmid, which contains the rat pro alpha1(I) collagen promoter linked to the chloramphenicol acetyltransferase (CAT) gene. Dexamethasone decreased CAT activity whereas TGF-beta increased the activity of this reporter gene. The increase in CAT activity observed with TGF-beta treatment was significantly decreased when dexamethasone was added to the cultures, although CAT activity did not return to control level. Since collagen synthesis in fibroblasts treated simultaneously with dexamethasone and TGF-beta1 was found to be the same as that of untreated samples, the data indicate that there is a dexamethasone-mediated posttranscriptional regulation of pro alpha1(I) collagen mRNA. These studies demonstrate that at the in vivo level, the cellular level, and the molecular level, dexamethasone is able to block the fibrogenic effect of TGF-beta.