Glucocorticoid excess predisposes to the development of diabetes, at least in part through impairment of insulin secretion. The underlying mechanism has remained elusive. We show here that dexamethasone upregulates transcription and expression of the serum- and glucocorticoid-inducible kinase 1 (SGK1) in insulin-secreting cells, an effect reversed by mifepristone (RU486), an antagonist of the nuclear glucocorticoid receptor. When coexpressed in Xenopus oocytes, SGK1 increases the activity of voltage-gated K(+) channel K(v)1.5. In INS-1 cells, dexamethasone stimulates the transcription of K(v)1.5, increases the repolarizing outward current, reduces peak values of [Ca(2+)](i) oscillations, and decreases glucose-induced insulin release. The latter effect is reversed by K(+) channel blockers 4-aminopyridine and tetraethylammonium and by a more selective K(v)1.5 channel inhibitor MSD-D. Dexamethasone also increases expression of K(v)1.5 in mouse islets and reduces glucose-induced insulin secretion, an effect reversed by MSD-D. In islets isolated from wild-type but not SGK1 knockout mice, dexamethasone significantly blunted glucose-, forskolin-, and phorbol myristic acid-induced insulin release. In conclusion, dexamethasone stimulates the transcription of SGK1, which in turn upregulates the activity of voltage-gated K(+) channels. Increased K(+) channel activity reduces Ca(2+) entry through voltage-gated Ca(2+) channels and insulin release.