Recent studies have demonstrated that the interconversion of active and inactive glucocorticoids plays a key role in determining the specificity of the mineralocorticoid receptor and controlling local tissue glucocorticoid receptor activation. Two distinct isoforms of the enzyme 11 beta-hydroxysteroid dehydrogenase (11 beta-HSD) have been identified. 11 beta-HSD1 is NADPH-dependent and at its major site of action (the liver) is a reductase, converting cortisone to cortisol (11-dehydrocorticosterone to corticosterone in the rat). 11 beta-HSD2 is NAD-dependent, is present in tissues such as the kidney and placenta, and converts cortisol to cortisone (corticosterone to 11-dehydrocorticosterone in the rat). Congenital or acquired deficiency of 11 beta-HSD2 produces the syndrome of apparent mineralocorticoid excess (SAME) in which cortisol gains access to the unprotected nonspecific mineralocorticoid receptor. The congenital deficiency is associated with mutations in the gene encoding the kidney isoform of 11 beta-HSD2; the acquired form results from inhibition of the enzyme by licorice, carbenoxolone, ACTH-dependent steroids in the ectopic ACTH syndrome, and possibly circulating inhibitors of the enzyme. This paper focuses on recent evidence, which suggest that low levels of placental 11 beta-HSD2 result in increased exposure of the fetus to maternal glucocorticoid and low birth weight. In animal studies using the rat we have shown that birth weight is correlated positively and placental weight negatively with the level of placental 11 beta-HSD. Thus animals with low birth weight and large placentae were those likely to be exposed to the highest level of maternal glucocorticoid. In man a similar relationship was found with birth weight being significantly correlated either with placental 11 beta-HSD activity or with the extent of cortisol inactivation by isolated perfused placental cotyledons. Administration of dexamethasone (which is poorly metabolized by placental 11 beta-HSD2) to pregnant rats resulted in decreased birth weight and the development of hypertension in the pups when adult. The same results were obtained when pregnant rats were given carbenoxolone, an inhibitor of placental 11 beta-HSD2. Low protein diet during pregnancy in the rat resulted in low birth weight of the pups, increased placental weight but decreased placental 11 beta-HSD activity, and adult hypertension. Thus increased glucocorticoid exposure of the fetus secondary to a failure of the normal inactivation of maternal glucocorticoid by the placental may be an important mechanism linking changes in the in utero environment and common adult diseases.