In the present study, we investigated the effect of glucocorticoid on neuronal differentiation of hippocampal progenitor HiB5 cells. Dexamethasone (DEX), a synthetic glucocorticoid, inhibited platelet-derived growth factor (PDGF)-induced differentiation of HiB5 cells. The inhibitory effect of DEX was antagonized by RU486, a glucocorticoid receptor (GR) antagonist, indicating the GR-mediated processes. Nestin mRNA level was decreased and midsize neurofilament (NF-M) mRNA level was increased as a function of neuronal differentiation. DEX significantly blocked PDGF-induced down-regulation of nestin mRNA level, and up-regulation of NF-M mRNA level, which were similar to those of undifferentiated cells. DEX inhibited PDGF-induced activation of cyclic AMP-responsive element binding protein (CREB) and AP-1, suggesting that glucocorticoid interfered with signal transduction cascades linking the PDGF receptor and downstream transcription factors. Indeed, DEX reduced PDGF-induced phosphorylation of extracellular signal-regulated kinases 1/2 (ERK1/2). Tyrosine phosphatase inhibitor reversed the effect of DEX on ERK1/2. In accordance with this finding, blockage of ERK1/2 signaling pathway with PD098059, a potent inhibitor for Ras/ERK pathway, mimicked the inhibitory effect of DEX on differentiation processes. Taken together, these results indicate that glucocorticoid inhibits PDGF-induced differentiation of hippocampal progenitor HiB5 cells by inhibiting the ERK1/2 signaling cascade via a tyrosine phosphatase-dependent mechanism.