We hypothesized that measurement of lung function (LF) and bronchial hyperresponsiveness (BHR) could serve as supplemental tools in evaluating the efficacy of treatment with inhaled corticosteroids in asthmatic children aged 2 to 5 yr. We studied 38 children (mean age: 53 mo; range: 35 to 71 mo) with moderately severe asthma in a single-center, randomized, double-blind, parallel-group, placebo-controlled study involving 8 wk of treatment. Budesonide (BUD) 400 microgram twice daily was administered via a pressurized metered-dose inhaler and metal spacer device. Symptom scores (SSc) and use of short-acting beta(2)-agonist were monitored with diary cards. LF in awake children was measured as the specific airway resistance (sRaw), using whole-body plethysmography; as resistance by the interrupter technique (Rint); and as resistance and reactance at 5 Hz (Rrs5, Xrs5) by the impulse oscillation technique. Cold air challenge (CACh) and methacholine challenge (MCh) were used to assess BHR. Children in the BUD group experienced significantly fewer night- and daytime symptoms (p < 0.05) and more symptom-free days (p < 0.05), but not nights (p = 0.07), than children in the placebo group. Daytime (p < 0.05) but not nighttime (p = 0.09) use of rescue medication and asthma exacerbation rates (3.7 versus 9.3 exacerbations/yr) (p = 0.006) were both in favor of BUD. LF measured with the Rint technique, Rrs5, and Xrs5 were significantly improved by BUD. BHR as measured by CACh improved significantly with BUD, whereas no improvement was found on MCh. In conclusion, inhaled BUD at a total dose of 800 microgram daily significantly improved SSc, asthma exacerbation rates, lung function, and BHR as assessed by CACh in asthmatic children aged 2 to 5 yr.