Carbonyl Reductase 1 (CBR1) is a ubiquitously expressed cytosolic enzyme important in exogenous drug metabolism but the physiological function of which is unknown. Here, we describe a role for CBR1 in metabolism of glucocorticoids. CBR1 catalyzes the NADPH- dependent production of 20β-dihydrocortisol (20β-DHF) from cortisol. CBR1 provides the major route of cortisol metabolism in horses and is up-regulated in adipose tissue in obesity in horses, humans and mice. We demonstrate that 20β-DHF is a weak endogenous agonist of the human glucocorticoid receptor (GR). Pharmacological inhibition of CBR1 in diet-induced obesity in mice results in more marked glucose intolerance with evidence for enhanced hepatic GR signaling. These findings suggest that CBR1 generating 20β-dihydrocortisol is a novel pathway modulating GR activation and providing enzymatic protection against excessive GR activation in obesity.