The intracellular enzyme 11 beta-hydroxysteroid dehydrogenase type 2 (11 beta-HSD2) catalyzes the unidirectional conversion of bioactive glucocorticoids to their inert metabolites. In the human placenta, 11 beta-HSD2 is highly expressed in syncytiotrophoblasts, although cytotrophoblasts also express this enzyme at lower levels. Given that cytotrophoblasts will differentiate into syncytiotrophoblasts in vivo and in vitro, the present study was designed to examine the hypothesis that the expression of 11 beta-HSD2 is induced during in vitro trophoblast differentiation. When Percoll-purified human cytotrophoblast cells were cultured under standard (20% oxygen) conditions, they aggregated and fused to form syncytiotrophoblasts. Within the first 24 h during differentiation, levels of 11 beta-HSD2 protein and activity were increased by 2- to 3-fold, but they did not increase further thereafter. However, when the cells were exposed to hypoxic (1% oxygen) conditions, both the induction of 11 beta-HSD2 and trophoblast differentiation were prevented. Taken together, these results demonstrate for the first time that the expression of 11 beta-HSD2 is induced early during trophoblast differentiation, and hypoxia prevents this induction, indicating that placental 11 beta-HSD2 expression is subjected to regulation by the local oxygen environment. If placental villi respond to hypoxia in a similar fashion in vivo, the present findings would suggest that hypoxia might be a factor contributing to the previously reported decreases in placental 11 beta-HSD2 in pregnancies complicated by intrauterine growth restriction and preeclampsia.