The role of inhaled corticosteroids in the management of chronic obstructive pulmonary disease (COPD) remains controversial. The purpose of this study was to evaluate whether sputum eosinophilia (defined as eosinophils > or = 3%) predicts clinical benefit from inhaled corticosteroid treatment in patients with smoking-related clinically stable moderate-to-severe COPD. Forty consecutive patients with effort dyspnoea (mean age 67 yrs; 52 pack-yr smoking history; post-bronchodilator forced expiratory volume in one second (FEV1) <60% predicted, consistent with moderate-to-severe smoking-related chronic airflow limitation) were enrolled. Subjects were treated with inhaled placebo followed by inhaled budesonide (Pulmicort Turbuhaler 1,600 microg.day(-1)), each given for 4 weeks. While the treatment was single-blind (subject level), sputum cell counts before and after treatment interventions were double-blind, thus removing bias. Outcome variables included spirometry, quality-of-life assessment and 6-min walk test. Sputum eosinophilia was present in 38% of subjects. In these, budesonide treatment normalised the eosinophil counts and, in comparison to placebo treatment, resulted in clinically significant improvement in the dyspnoea domain of the disease-specific chronic respiratory questionnaire (0.8 versus 0.3) and a small but statistically significant improvement in post-bronchodilator spirometry (FEV1 100 mL versus 0 mL; p<0.05). In conclusion, sputum eosinophilia predicts short-term clinical benefit from high-dose inhaled corticosteroid treatment in patients with stable moderate-to-severe chronic obstructive pulmonary disease.