The glucocorticoid hormone cortisol is known to have wide-ranging effects on a variety of physiological systems, including the morphology and physiology of the amygdala and hippocampus. Disruptions of cortisol regulation and signaling are also linked with psychiatric disorders involving emotional disturbances. Although there is much evidence to suggest a relationship between cortisol signaling and the brain physiology underlying emotion, few studies have attempted to test for direct effects of cortisol on the neurophysiology of emotion. We administered exogenous synthetic cortisol (hydrocortisone, HCT) using two different dosing regimens (25 mg/day over 4 days, 100 mg single dose), in a double-blind placebo-controlled functional magnetic resonance imaging (fMRI) study. During fMRI scanning, healthy subjects viewed images designed to induce happy, sad, and neutral emotional states. Subjective emotional reactions were collected for each experimental stimulus after fMRI scanning. Mood ratings were also collected throughout the 4 days of the study. Both dose regimens of HCT resulted in decreased subgenual cingulate activation during sadness conditions. The 25 mg/day regimen also resulted in higher arousal ratings of sad stimuli. No effects of HCT were observed on any mood ratings. Few reliable effects of HCT were observed on brain activity patterns or subjective emotional responses to stimuli that were not sad. The inhibitory effects of cortisol on sadness-induced subgenual cingulate activity may have critical relevance to the pathophysiology of major depression, as both subgenual hyperactivity and decreased sensitivity to cortisol signaling have been documented in patients with depression.