Glucocorticoid (GC) use is known to induce or enhance the growth of Kaposi's sarcoma (KS) in many clinical settings including human immunodeficiency virus infection, collagen vascular disease, lymphoproliferative disorders, and renal transplantation. Because GCs may induce immune suppression and thus tumor growth, we determined whether GCs had a direct effect on KS growth. We found that GCs directly induce the growth of KS cell lines. In examining the mechanism of action of GCs, we did not observe induction of known autocrine growth factors for KS including interleukin-1 (IL-1), IL-6, oncostatin-M, basic fibroblast growth factor (bFGF), and vascular endothelial growth factor (VEGF). We thus examined factor(s) that inhibit KS growth. Transforming growth factor-beta (TGF-beta) is produced by KS cells and has pleiotropic effects, including inhibiting the growth of hematopoietic and endothelial cells. We show that TGF-beta is produced by KS cells in both the latent and active forms, and that TGF-beta is an autocrine growth inhibitory factor. We then studied the effects of GCs on the regulation of TGF-beta and found that GCs do not inhibit TGF-beta transcription, but significantly inhibit TGF-beta activation. This effect is mediated through regulation of the TGF-beta activation pathway. TGF-beta is activated by plasmin which is positively regulated by plasminogen activator (PA) and PA receptor (PAR), and negatively regulated by plasminogen activator inhibitor (PAI). GCs downregulated PAR and upregulated PAI. Thus, glucocorticoids enhance KS cell growth through the regulation of TGF-beta activation.