A mechanism-based model for pharmacodynamic effects of dexamethasone (DEX) was incorporated into our model for arthritis disease progression in the rat to aid in identification of the primary factors responsible for edema and bone loss. Collagen-induced arthritis (CIA) was produced in male Lewis rats following injection of type II porcine collagen. DEX was given subcutaneously in single doses of 0.225 or 2.25 mg/kg or 7-day multiple doses of 0.045 or 0.225 mg/kg at 21 days post disease induction. Effects on disease progression were measured by paw swelling, bone mineral density (BMD), body weights, plasma corticosterone (CST), and TNF-α, IL-1β, IL-6, and GR mRNA expression in paw tissue. Lumbar and femur BMD was determined by PIXImus-II dual energy x-ray absorptiometry. Plasma CST was assayed by HPLC. Cytokine and GR mRNA were assayed by quantitative real-time PCR. Indirect response models, drug-interaction models, transduction processes, and the 5th-generation model of corticosteroid dynamics were integrated and applied using S-ADAPT software to describe how dexamethasone binding to GR can regulate diverse processes. Cytokine mRNA, GR mRNA, plasma CST, and paw edema were suppressed following DEX administration. TNF-α mRNA expression and BMD appeared to increase immediately after dosing but were ultimately reduced. Model parameters indicated that IL-6 and IL-1β were most sensitive to inhibition by DEX. TNF-α appeared to primarily influence edema while IL-6 contributed the most to bone loss. Lower doses of corticosteroids may be sufficient to suppress the cytokines most relevant to bone erosion.