In the rat, urinary concentrating ability develops progressively during the third postnatal (P) week and nearly reaches adult level at weaning (P21) governed by a rise of circulating glucocorticoid. Elevated extracellular osmolality can lead to growth arrest of epithelial cells. We tested the hypothesis that supranormal exposure of rat pups to glucocorticoid before the endogenous surge enhances urinary concentrating ability but inhibits renomedullary cell proliferation. Proliferating cell nuclear antigen (PCNA)-positive cells shifted from the nephrogenic zone in the first postnatal week to Tamm-Horsfall-positive thick ascending limb (TAL) cells at the corticomedullary junction at P10-14. Renal PCNA protein abundance was stable in the suckling period and decreased 10-fold after weaning. Renal PCNA protein abundance decreased in response to dexamethasone (DEXA, 100 µg/kg/day, P8-12). Prolonged administration of DEXA (P1-P11) reduced selectively the area and thickness of outer medulla and the number of PCNA-positive cells. DEXA (P8-12) increased urinary and papillary osmolality in normohydrated and water-deprived pups and led to osmotic equilibrium between interstitium and urine while apoptotic and GADD153-positive cells increased in inner medulla. TAL-associated NaCl transporters NKCC2, Na-K-ATPase-₁, NHE3 and ROMK increased significantly at weaning and in response to DEXA. We conclude that a low level of circulating glucocorticoid is permissive for proliferation of Henles loop and outer medulla before weaning. A reduced papillary tonicity is a crucial factor for the reduced capacity to concentrate urine during postnatal kidney development. We speculate that supranormal exposure to glucocorticoid in the suckling period can alter kidney medullary structure and function permanently.