Periventricular leukomalacia (PVL), a brain injury encountered in about 10% of very low birthrate infants, is characterized by a loss of myelin producing oligodendrocytes in the white matter. We studied potential protective effects of corticosteroids in a cell culture model that mimicks the toxic effects of the inflammatory cytokines IFN[gamma] and TNFa released from astrocytes and microglia in response to ischemia or infections. Our results show that corticosterone, deoxycorticosterone and dexamethasone (DEX) can facilitate survival and expression of the myelin specific proteins myelin basic protein (MBP), cyclic nucleotide phosphodiesterase (CNP) and myelin associated glycoprotein (MAG), with DEX showing the strongest effects. Moreover, cell surface scanning with ion conductance microscopy and membrane capacitance recordings showed that DEX could restore the increase in soma volume and membrane area occuring during normal differentiation. Whole cell patch clamp recordings further showed that DEX could restore the down regulation of voltage gated sodium currents and delayed rectifyer potassium currents occuring during differentiation of oligodendrocytes. Our results suggest that coapplication of corticosteroids with cytokines can prevent their deleterious effects on oligodendrocyte precursor cell survival and development into the functional differentiated cell.