Glucocorticoids (GC) are the primary steroids that regulate inflammation and have been exploited therapeutically in inflammatory skin diseases. Despite the broad-spectrum therapeutic use of GC the biochemical rationale for locally treating inflammatory skin conditions is poorly understood, as systemic GC production remains largely functional in these patients. GC synthesis has been well characterised in healthy skin but the pathological consequence has not been examined. Here we show de novo GC synthesis and GR expression is dysfunctional in both non-lesional and lesional psoriatic skin. Use of GR epidermal knockout (GREKO) mice with adrenalectomy allowed for the distinction between local (keratinocyte) and systemic GC activity. Compensation exhibited by adult GREKO mice demonstrated that keratinocyte-derived GC synthesis protected skin from topical PMA-induced inflammatory assault. Thus localized de novo GC synthesis in skin is essential for controlling inflammation and loss of the GC pathway in psoriatic skin represents an additional pathological process in this complex inflammatory skin disease.