Glucocorticoid receptor (GR) is known to associate with KATs and KDACs to regulate transcription. The current model of GR-mediated transcription focuses on agonist-dependent recruitment of KATs to acetylate histones and casts KDACs as corepressors in the presence of antagonist. Recent studies have shown KDACs to function as coactivators in the GR-mediated activation of the MMTV promoter and inhibition of KDACs impairs this activation. Nevertheless, the effect of KDAC inhibition on the GR-regulated transcriptome is unknown. Our expression profiling studies in a glucocorticoid (GC) responsive hepatoma-derived cell line, show that the class I-selective KDACi, VPA, has a profound impact on the GR-regulated hepatic transcriptome. VPA treatment alone mimics GC signaling at some GR-target genes and cooperates with GC to activate a small number of genes. However, the predominant effect of VPA, seen in more than 50% of the GR-target genes, is impairment of normal GR-mediated activation. This suggests that KDACs play a significant role in facilitating GR signaling. We have shown that VPA does not impair GR processing and that the inhibitory effects of VPA are due to impaired transcription. We have also determined that apicidin, a structurally distinct class I-selective KDACi, impairs GR-transactivation similar to VPA, while valpromide, a structural analog of VPA without KDACi activity, does not. In addition, siRNA-mediated depletion of KDAC1 fully or partially mimics the effects of VPA at most of the VPA impaired GR-target genes and co-depletion of KDACs 1 and 2 caused full or partial impairment of Dex-activation at a few other genes. Collectively, our results show that class-I KDACs facilitate GR-mediated transcription at most of the GR-target genes and that KDAC1 alone or in co-operation with KDAC2 is required for efficient GR-mediated transactivation. Furthermore, ChIP assays have shown that active KDACs are constitutively present at the gene promoters and that KDAC inhibition does not affect GR binding to the DNA. Thus KDACs could potentially deacetylate the coregulators necessary for transcriptional activation. Finally, KDACs are known targets of a group of drugs either being used or evaluated in the treatment of cancer and other diseases. These results also pose ramifications for the clinical use of these drugs.