Glucocorticoids (GCs) are highly effective in the treatment of inflammatory and autoimmune conditions but their therapeutic use is limited by numerous adverse effects. Recent insights into the mechanisms of action of both endogenous and exogenous GCs on bone cells have unlocked new approaches to the development of effective strategies for the prevention and treatment of GC-induced osteoporosis. Furthermore, topical studies in rodents indicate that the osteoblast-derived peptide, osteocalcin, plays a central role in the pathogenesis of GC-induced diabetes and obesity. These exciting findings mechanistically link the detrimental effects of GCs on bone and energy metabolism. In this article we review the physiology and pathophysiology of GC action on bone cells, and discuss current and emerging concepts regarding the molecular mechanisms underlying adverse effects of GCs such as osteoporosis and diabetes.