Induction of surfactant protein-A (SP-A) gene expression in fetal lung type II cells by cAMP and IL-1 is mediated by increased binding of thyroid transcription factor-1 (TTF-1) and NF-B proteins p50 and p65 to the TTF-1-binding element (TBE) at -183 bp. In type II cell transfections, dexamethasone (Dex) markedly inhibits cAMP-induced expression of rabbit SP-A:human growth hormone (hGH) fusion genes containing as little as 300 bp of the SP-A 5'-flanking sequence. Dex inhibition is blocked by RU-486, suggesting a role of the glucocorticoid receptor (GR). The present study was undertaken to define the mechanisms for GR inhibition of SP-A expression. Cotransfection of primary cultures of type II cells with a GR expression vector abrogated cAMP induction of SP-A promoter activity while, at the same time, causing a 60-fold induction of cotransfected mouse mammary tumor virus (MMTV) promoter. In lung cells transfected with a fusion gene containing three TBEs fused to the basal SP-A promoter, Dex prevented the stimulatory effect of IL-1 on TTF-1 induction of SP-A promoter activity, suggesting that the GR inhibits SP-A promoter activity through the TBE. In gel shift assays using nuclear extracts from human fetal type II cells cultured in the absence or presence of cAMP, Dex markedly reduced binding of nuclear proteins to the TBE and blocked the stimulatory effect of cAMP on TBE-binding activity. Our finding that Dex increased expression of the NF-kappaB inhibitory partner IkappaB-alpha suggests that the decrease in TBE-binding activity may be caused, in part, by GR inhibition of NF-kappaB interaction with this site.