The safety of dexamethasone for neonates has been questioned, partly because of its multiple unspecific effects on the immune system. Specific effects of dexamethasone on co-stimulatory and immune suppressive functions of neonatal compared with adult macrophages (MPhi) are not known. We evaluated the effect of dexamethasone on the expression and regulation of MPhi B7 family receptors (B7-1, CD80; B7-2, CD86) and on their ability to co-stimulate T cells. Cord blood macrophages (CBMPhi) and MPhi from healthy adults (PBMPhi) were isolated, and cell surface markers were phenotyped by flow cytometry. In tissue culture, cells were exposed to dexamethasone, interferon-gamma (IFN-gamma), cAMP, or a T cell mitogen (alphaCD3) and examined for their capacity to activate or destroy T cells. CBMPhi were less able to up-regulate CD80 and CD86 than PBMPhi (p < 0.05). Dexamethasone inhibited the up-regulation of CD80, CD86, and HLA-DR on PBMPhi and even more so on CBMPhi (p < 0.05 versus PBMPhi for CD80 and CD86). In the presence of dexamethasone, stimulation with alphaCD3 MAb enhanced cytotoxic functions of PMBMPhi and CB(mu)phi with an increase in deleted T cells, a reduced fraction of enlarged T cells, and an inhibition of T cell CD28 up-regulation, which again were more pronounced with CBMPhi (p < 0.05 versus PBMPhi). In conclusion, neonatal MPhi are exquisitely sensitive to the inhibitory effects of dexamethasone on B7 expression. Although perhaps producing the desired therapeutic effect, dexamethasone may do so in newborns at the expense of a near complete paralysis of MPhi-dependent T cell function.