In an attempt to elucidate the mechanism whereby dexamethasone could reactivate bovine herpesvirus type-1 the effect of dexamethasone on virus replication and leukocyte functions was assessed. No effect was detectable on either virus yield or in vitro replication kinetics. In contrast, dexamethasone influenced several leukocyte functions thought to be of importance in antiviral defense and maintenance of latency. In vitro exposure of peripheral blood polymorphonuclear neutrophilic granulocytes of normal animals to dexamethasone depressed their migratory and cytotoxic activities, but had no effect on Fc- and complement receptor expression. Dexamethasone also depressed lectin-induced lymphocyte proliferation and interleukin-2 generation in a dose-dependent manner. When cows were treated repeatedly with dexamethasone and their leukocytes assayed, suppression of phytohemagglutinin-induced lymphocyte proliferation, interleukin-2 generation, natural cytotoxicity of mononuclear cells and polymorphonuclear neutrophilic granulocyte functions were observed. In contrast, concanavalin A induced lymphocyte proliferation was increased following treatment.