Previous studies have shown that asthmatics have hyperinflation as defined by larger total lung capacity. The present study was set up in order to document changes in asthma clinic, airway calibre, airway reactivity and lung volumes after budesonide treatment. After a 2-week run-in period, 28 children with moderate persistent asthma were treated in a double-blind manner either with budesonide (0.4 mg/day) or placebo for 8 weeks and, thereafter, all patients were treated with open-label budesonide for a further 20 weeks. Symptoms, bronchodilator requirements and airway calibre improved significantly after 8 weeks of treatment (p < 0.05 for each) and prolonged treatment did not cause any further improvement. Reduction in hyperreactivity was apparent only after 20-28 weeks of treatment. Total lung capacity decreased along with budesonide treatment in both groups suggesting that early introduction of an inhaled corticosteroid may be useful in the prevention of asthma-related remodelling of the lung and thoracic cage.