1. The amounts of latent and active collagenase and of collagenase inhibitor (TIMP) produced by two normal, three rheumatoid and two osteoarthritic synovial specimens in culture were compared. Normal synovia produced TIMP, but little latent enzyme. Rheumatoid synovia produced higher levels of total collagenase activity than normal, of which up to 50% in one sample was present in the medium in an active form, whereas no specific inhibitory activity due to TIMP was detectable. The amounts of collagenase and TIMP produced by osteoarthritic synovia were more variable and appeared to reflect the degree of inflammation in the tissue at the time of initiating the cultures. 2. Concentrations of TIMP were usually higher in the culture media of normal, rheumatoid and osteoarthritic synovia when hydrocortisone was present. Correspondingly, amounts of total collagenase were reduced. Production of prostaglandin E (PGE) were inhibited in a dose-dependent manner by hydrocortisone. 3. Indomethacin had no consistent effect on the production of TIMP by rheumatoid and osteoarthritic synovia, although it tended to depress production of collagenase. The production of TIMP by normal synovia was depressed by indomethacin. No PGE was detectable in the media when indomethacin was present. 4. These results are consistent with those from previous animal studies, and we conclude that the balance between production of collagenase and TIMP may be critical in determining the extent of the destructive processes in arthritis. The ability of hydrocortisone to suppress production of collagenase and to increase free TIMP concentration, as well as to inhibit synthesis of prostaglandin, may explain in part how the drug exerts its therapeutic effects in patients with rheumatoid arthritis.