Glucocorticoid hormones counteract inflammation and phorbol ester tumor promotion and drastically decrease the expression of several extracellular proteases, including collagenase I. Glucocorticoid hormone inhibits basal and induced transcription of collagenase by interfering with AP-1, the major enhancer factor of the collagenase promoter. The mechanism of interference is novel in that it does not require protein synthesis, it depends on the hormone receptor but not its binding to DNA, it occurs at hormone doses one order of magnitude below those required for gene activation, and it involves down-modulation of the trans-activating function of preexisting unbound and DNA-bound AP-1. Coprecipitation experiments suggest direct AP-1-hormone receptor interaction, which also possibly explains the reverse experiment: overexpression of Fos or Jun inhibits the expression of hormone-dependent genes.