Airway inflammation is a common condition where glucocorticoids (GC) are a well‐established therapy. It has been demonstrated that GC stimulate components of innate immunity. Specifically, GC up‐regulate TLR2 expression and activation upon inflammatory stimuli; however, little is known about the signalling involved in this process. To determine the mechanism by which dexamethasone modulates TLR2‐induced cytokine production this signalling pathway was monitored in a lung epithelial cell line exposed to the TLR2 synthetic agonist, Pam₃‐Cys‐Ser‐Lys₄. These experiments demonstrate that phosphatidylinositol 3‐kinase (PI3K) is critical for the TLR2 downstream effects of GC. Cells expressing a PI3K mutant (p85‐dominant negative, DN; p85 Δ478–511) and exposed to Pam₃‐Cys‐Ser‐Lys₄ in the presence or absence of dexamethasone, showed enhanced tumour necrosis factor (TNF)α expression while AP‐1 and NF‐κB transcriptional activity were repressed. We provide experimental evidence that PI3K physically interacts with the glucocorticoid receptor (GR) through two putative PI3K recruitment consensus YxxM binding motifs in the GR, suggesting that some functions regulated by this receptor might occur through kinase interaction. Mutations of two tyrosine residues in the GR, 598 and 663, to phenylalanine significantly reduced interaction with PI3K and the GC effects on TLR2‐induced TNF‐α expression. However, these mutations did not alter GR transcriptional activity nor affect cellular localization of the expressed mutant GR in COS‐1 cells. Therefore, the PI3K‐GR interaction may contribute to the effects of GC on the TLR2 pro‐inflammatory signalling cascade, thus defining a novel signalling mechanism with a profound impact on innate immune responses.