Plasma cortisol is largely bound to corticosteroid-binding globulin (CBG), which regulates its bioavailability by restricting exit from capillaries. Levels of CBG may be altered by several factors including stress and this can influence the amount of cortisol reaching cells. This study investigated the effect of social instability on plasma concentrations of CBG, total and free (not protein bound) cortisol in horses. Horses new to our research herd ('newcomers') were confined in a small yard with four dominant resident horses for 3-4 h daily for 3-4 (n = 5) or 9-14 (n = 3) days. Jugular blood was collected in the mornings from newcomers before the period of stress began ('pre-stress'), and then before each day's stress. Residents were bled before stress on the first and thirteenth day. Residents always behaved aggressively towards newcomers. By the end of the stress period, all newcomers were subordinate to residents. In newcomers (n = 8) after 3-4 days of social stress, CBG binding capacity had fallen (P = 0.0025), while free cortisol concentrations had risen (P = 0.0016) from pre-stress values. In contrast, total cortisol did not change. In residents, CBG had decreased slightly but significantly (P = 0.0162) after 12 days of stress. Residents and newcomers did not differ in pre-stress CBG binding capacity, total or free cortisol concentrations. However, by the second week of stress, CBG binding capacity was lower (P = 0.015) and free cortisol higher (P = 0.030) in newcomers (n = 3) than in residents. Total cortisol did not differ between the groups. In conclusion social stress clearly affected the adrenal axis of subordinate newcomer horses, lowering the binding capacity of CBG and raising free cortisol concentrations. However, no effect of stress could be detected when only total cortisol was measured. Therefore, to assess adrenal axis status accurately in horses, it is essential to monitor the binding capacity of CBG and free cortisol concentrations in addition to total cortisol levels.