Glucose-6-phosphatase (G6Pase) activity and the rate of glucose cycling are increased in islets from animal models of Type II (non-insulin-dependent) diabetes mellitus. Glucocorticoid treatment further stimulates these processes and inhibits glucose-induced insulin release. To determine whether these effects result from a direct action of glucocorticoids on the beta-cells, we used isolated islets. The islets were from transgenic mice overexpressing the glucocorticoid receptor in their beta-cells to increase the cells' sensitivity to glucocorticoid. Islets from transgenic and non-transgenic control mice utilized and oxidized the same amount of glucose. In contrast, islet G6Pase activity was 70 % higher, glucose cycling was increased threefold and insulin release was 30 % lower in islets from transgenic mice. Hepatic G6Pase activity was the same in transgenic and control mice. Dexamethasone administration increased G6Pase activity and glucose cycling and decreased insulin release in both transgenic and control mouse islets. We conclude that glucocorticoids stimulate islet G6Pase activity and glucose cycling by acting directly on the beta-cell. That activity may be linked to the inhibition of insulin release. [Diabetologia (1998) 41: 634–639]