IGF-I stimulation of cell proliferation and c-Fos expression in skeletal muscle cells is markedly enhanced by dexamethasone. The effect of dexamethasone is not mediated by changes in IGF-binding proteins, as evidenced by similar effects of dexamethasone on the actions of insulin, PDGF-BB, and the IGF-I analogue long R3IGF-I. Dexamethasone also does not alter autocrine IGF-II secretion by muscle cells. To investigate the mechanism of the augmentation of IGF-I action, the effects of dexamethasone on intracellular IGF-I signaling pathways were determined. In dexamethasone-treated cells, the levels of IGF-I receptor tyrosine phosphorylation and receptor-associated phosphatidylinositol 3-kinase activity were increased. Dexamethasone-treated cells also showed increased and prolonged tyrosine phosphorylation of the Shc proteins. In contrast, dexamethasone decreased both tyrosine phosphorylation and expression of insulin receptor substrate 1 (IRS-1) and IRS-1-associated phosphatidylinositol 3-kinase activity. Thus, distinct signaling pathways activated by the IGF-I receptor in skeletal muscle cells are differentially regulated by dexamethasone. Potentiation of IGF-I action correlates with increased IGF-I receptor-associated phosphatidylinositol 3-kinase activity and tyrosine phosphorylation of Shc, but appears to be independent of activation of the IRS-1/phosphatidylinositol 3-kinase signaling pathway.