Annexin 1 (Anx-1) is a mediator of the anti-inflammatory actions of glucocorticoids, but the mechanism of its anti-inflammatory effects is not known. We investigated the role of Anx-1 in the regulation of the proinflammatory cytokine, IL-6. Lung fibroblast cell lines derived from Anx-1(-/-) and wild-type (WT) mice were treated with dexamethasone and/or IL-1. IL-6 mRNA and protein were measured using real-time PCR and ELISA, and MAPK pathway activation was studied. Compared with WT cells, unstimulated Anx-1(-/-) cells exhibited dramatically increased basal IL-6 mRNA and protein expression. In concert with this result, Anx-1 deficiency was associated with increased basal phosphorylated p38, JNK, and ERK1/2 MAPKs. IL-1-inducible phosphorylated p38 was also increased in Anx-1(-/-) cells. The increase in IL-6 release in Anx-1(-/-) cells was inhibited by inhibition of p38 MAPK. Anx-1(-/-) cells were less sensitive to dexamethasone inhibition of IL-6 mRNA expression than WT cells, although inhibition by dexamethasone of IL-6 protein was similar. MAPK phosphatase-1 (MKP-1), a glucocorticoid-induced negative regulator of MAPK activation, was up-regulated by dexamethasone in WT cells, but this effect of dexamethasone was significantly impaired in Anx-1(-/-) cells. Treatment of Anx-1(-/-) cells with Anx-1 N-terminal peptide restored MKP-1 expression and inhibited p38 MAPK activity. These data demonstrate that Anx-1 is an endogenous inhibitory regulator of MAPK activation and IL-6 expression, and that Anx-1 is required for glucocorticoid up-regulation of MKP-1. Therapeutic manipulation of Anx-1 could provide glucocorticoid-mimicking effects in inflammatory disease.