Cyclooxygenase-2 (COX-2) plays an important role in rheumatoid arthritis and therefore, has been a major target for anti-arthritis therapies. The expression of COX-2 is induced by inflammatory cytokines such as TNF-alpha and IL-1beta, and inhibited by glucocorticoids. However, the molecular mechanisms underlying the anti-inflammatory and immune suppressive actions of glucocorticoids are not well defined. Here we report that glucocorticoid-induced leucine zipper (GILZ) mimics glucocorticoid action and inhibits inflammatory cytokine-induced COX-2 expression in bone marrow mesenchymal stem cells, the cells that have been recently implicated in the pathogenesis and progression of rheumatoid arthritis. Using a retrovirus-mediated gene expression approach we demonstrate that overexpression of GILZ inhibits TNF-alpha and IL-1beta-induced COX-2 mRNA and protein expression, and knockdown of GILZ by shRNA reduces glucocorticoid inhibition of cytokine-induced COX-2 expression. Consistent to these results, overexpression of GILZ also inhibits NF-kappaB-mediated COX-2 promoter activity. Finally, we show that GILZ inhibits COX-2 expression by blocking NF-kappaB nuclear translocation. Our results suggest that GILZ is a key glucocorticoid effect mediator and that GILZ may have therapeutic value for novel anti-inflammation therapies.