Glucocorticoids potentiate the early steps of preadipocyte differentiation and promote obesity in Cushing's syndrome and during prolonged steroid therapy. We show that glucocorticoids stimulate 3T3 L1 preadipocyte differentiation through a non-transcriptional mechanism mediated through the ligand-binding domain of the glucocorticoid receptor. This enhanced the onset of CCAAT/enhancer binding protein (C/EBPalpha) expression by potentiating its initial transcriptional activation by C/EBPbeta. In the absence of steroid, C/EBPbeta associated with a transcriptional corepressor complex containing mSin3A and histone deacetylase 1 (HDAC1), but lacking HDAC2 and RbAp46/48. HDAC1/mSin3A were recruited to the C/EBPalpha promoter with C/EBPbeta and promoted the deacetylation of histone H4. Steroid induced the specific depletion of this corepressor by targeting the HDAC1 within the complex for degradation through the 26S proteasome. Treatment with histone deacetylase inhibitors replaced the effects of steroid treatment on preadipocyte differentiation and C/EBPalpha expression, while overexpression of HDAC1 abrogated the stimulatory effects of steroid. Recapitulation of the glucocorticoid effect by progestin treatment in the presence of the progesterone receptor ligand-binding domain suggests a conserved mechanism relevant to many aspects of steroid-mediated differentiation.