We investigated the effect of inhaled corticosteroids on the phenotypes and functional capacity of macrophages obtained by bronchoalveolar lavage from patients with pulmonary sarcoidosis. The results were correlated with clinical status and therapeutic efficacy. Ten symptomatic sarcoid patients (previously untreated) with radiological parenchymal shadowing and abnormal pulmonary function received inhaled budesonide, 800 micrograms m twice daily via a Nebuhaler for 16 weeks. A placebo group included ten healthy volunteers and five sarcoid patients with similar features to the treated group. Drug distribution studies showed that 10% of the inhaled drug was deposited in the alveolar region. All ten treated sarcoid patients had symptomatic relief with no adverse effects. Three of these ten patients had significant resolution of their radiological shadowing. No significant difference in pulmonary function was observed. At the cellular level, a significant decrease in lavage lymphocytosis was seen after 16 weeks, during which time there was a concomitant change in the phenotype and functional characteristics of the alveolar macrophage population. No similar changes were observed in the placebo group. Our results suggest that inhaled budesonide can modulate the aberrant immunological reactions existent in the lung in pulmonary sarcoidosis, and produce concomitant symptomatic relief with no side effects. It is postulated that this effect may occur through action on the local alveolar macrophage population.