To investigate the contribution of the glucocorticoid receptor (GR) in skin development and the mechanisms underlying this function, we have analyzed two mouse models in which GR has been functionally inactivated: the knock-out GR^-/- mice and the dimerization mutant GR^dim/dim that mediates defective DNA binding-dependent transcription. Since GR null mice die perinatally, we evaluated skin architecture of late embryos by histological, immunohistochemical and electron microscopy studies. Loss-of-function of GR resulted in incomplete epidermal stratification with dramatically abnormal differentiation of GR^-/-, but not GR^+/- embryos, as demonstrated by the lack of loricrin, filaggrin and involucrin markers. Skin sections of GR^-/- embryos revealed edematous basal and lower spinous cells and electron micrographs showed increased intercellular spaces between keratinocytes and reduced number of desmosomes. The absent terminal differentiation in GR^-/- embryos correlated with an impaired activation of caspase-14, which is required for the processing of profilaggrin into filaggrin at late embryo stages. Accordingly, the skin barrier competence was severely compromised in GR^-/- embryos. Cultured mouse primary keratinocytes (MPK) from GR^-/- mice formed colonies with cells of heterogeneous size and morphology that showed increased growth and apoptosis, indicating that GR regulates these processes in a cell-autonomous manner. The activity of ERK1/2 was constitutively augmented in GR^-/- skin and MPKs relative to wt, which suggests that GR modulates skin homeostasis, at least partially, by antagonizing ERK function. Moreover, the epidermis of GR^+/dim and GR^dim/dim embryos appeared normal, thus suggesting that DNA-binding-independent actions of GR are sufficient to mediate epidermal and hair follicle development during embryogenesis.