The effects of dexamethasone (DEX) on adipose precursor cells from rat adipose tissue were studied in primary culture. When added from the beginning of culture in media containing untreated fetal calf serum (SM), serum treated with charcoal to remove steroid hormones (CSM), or serum-free medium (SFM), DEX inhibited cellular growth. Lipoprotein lipase (LPL) as well as glycerophosphate dehydrogenase (GPDH) activities, markers of cellular differentiation, were also inhibited, except in CSM where LPL was stimulated. When added after cellular confluence, however, DEX had opposite effects and now stimulated cellular differentiation. This effect was highly dependent on insulin. These studies demonstrate that DEX affects adipose precursor cells in several ways, depending on the type of culture medium, the time period of exposure, and the presence of insulin.