In a double-blind, cross-over study, we examined the effect of inhaled budesonide (800 microgram twice daily via Turbohaler) on lung function and various markers of airway inflammation including airway responsiveness to methacholine (PC20), exhaled nitric oxide (NO), eosinophils in induced sputum, bronchoalveolar lavage (BAL), and airway biopsies from 14 patients with mild asthma needing beta2- agonist therapy only. After inhaled steroids, there was a significant increase in FEV1 and PC20, and reduction in exhaled NO. Eosinophils in induced sputum and airway biopsy sections were also significantly decreased, although BAL eosinophil counts remained unchanged. At baseline, significant correlations were observed between exhaled NO and PC20 methacholine (r = 0.64, p < 0.05), exhaled NO and peak expiratory flow rate (PEFR) variability (r = 0. 65, p < 0.05), sputum eosinophils and FEV1 (r = -0.63, p = 0.05), and sputum eosinophils and log PC20 methacholine (r = -0.67, p < 0. 05). After treatment with inhaled steroids, there was a significant correlation between eosinophils in biopsy sections, and BAL, with log PC20 methacholine. It is likely that these parameters represent different aspects of the inflammatory process, which are all inhibited by inhaled steroids.