11beta-Hydroxysteroid dehydrogenases (11beta-HSDs) catalyze interconversion of active corticosterone and inert 11-dehydrocorticosterone, thus regulating glucocorticoid access to intracellular receptors in vivo. 11beta-HSD type 1 is a reductase, locally regenerating active glucocorticoids. To explore the role of this isozyme in the brain, we examined hypothalamic-pituitary-adrenal axis (HPA) regulation in mice homozygous for a targeted disruption of the 11beta-HSD-1 gene. 11beta-HSD-1-deficient mice showed elevated plasma corticosterone and ACTH levels at the diurnal nadir, with a prolonged corticosterone peak, suggesting abnormal HPA control and enhanced circadian HPA drive. Despite elevated corticosterone levels, several hippocampal and hypothalamic glucocorticoid-sensitive messenger RNAs were normally expressed in 11beta-HSD-1-deficient mice, implying reduced effective glucocorticoid activity within neurons. 11beta-HSD-1-deficient mice showed exaggerated ACTH and corticosterone responses to restraint stress, with a delayed fall after stress, suggesting diminished glucocorticoid feedback. Indeed, 11beta-HSD-1-deficient mice were less sensitive to exogenous cortisol suppression of HPA activation. Thus 11beta-HSD-1 amplifies glucocorticoid feedback on the HPA axis and is an important regulator of neuronal glucocorticoid exposure under both basal and stress conditions in vivo.