Corticosteroid treatment (CST) failure is associated with poor outcomes for patients with gastrointestinal graft-versus-host disease (GI GVHD). CST is intended to target the immune system, but the glucocorticoid receptor is widely expressed, including within the intestines, where its effects are poorly understood. Here, we report that corticosteroids directly target intestinal epithelium, potentially worsening immune-mediated GI damage. Corticosteroids administered to mice in vivo and intestinal organoid cultures ex vivo reduced epithelial proliferation. Following irradiation, immediate CST mitigated GI damage, but delayed treatment attenuated regeneration and exacerbated damage. In a murine steroid-refractory GVHD model, CST impaired epithelial regeneration, worsened crypt loss, and reduced intestinal stem cell (ISC) frequencies. CST also exacerbated immune-mediated damage in organoid cultures with “steroid-refractory” GR-deficient T cells or Interferon-γ. These findings correlated with corticosteroid-dependent changes in apoptosis-related gene expression and STAT3-related epithelial proliferation. Conversely, Interleukin-22 administration enhanced STAT3 activity and overcame corticosteroid-mediated attenuation of regeneration, reducing crypt loss and promoting ISC expansion in steroid-treated mice with GVHD. Therefore, CST has the potential to exacerbate GI damage if it fails to control the damage-inducing immune response, but this risk may be countered by strategies augmenting epithelial regeneration, thus providing rationale for clinical approaches combining such tissue-targeted therapies with immunosuppression.