Ursodeoxycholic acid (UDCA) is a safe medical therapy for primary biliary cirrhosis (PBC), but its effect on liver histology remains uncertain. Budesonide is a glucocorticoid with high receptor activity and high first-pass metabolism in liver. We evaluated the combination of budesonide and UDCA on liver histology and compared this with UDCA alone in a 3-year prospective, randomized, open multicenter study. Patients with PBC (n = 77), at stages I to III, were randomized into 2 treatment arms, A (n = 41): budesonide 6 mg/d and UDCA 15 mg/kg/d and B (n = 36): UDCA 15 mg/kg/d. Liver histology was assessed at the beginning and at the end of the study. Liver function tests and glucose and cortisol values were determined every 4 months. Paired liver biopsy specimens were available from 69 patients (A = 37 and B = 32). Stage improved 22% in group A but deteriorated 20% in group B (P = .009). Fibrosis decreased 25% in group A but increased 70% in group B (P = .0009). S-PIIINP decreased significantly in group A. Inflammation decreased in both groups, 34% in group A (P = .02), but only 10% in group B (P = NS). Serum liver enzymes decreased significantly in both treatment arms. Bilirubin values rose in group B but stayed stable in group A (A/B P = .002). A mild systemic glucocorticoid effect from budesonide was evident after 2 years. In conclusion, budesonide combined with UDCA improved liver histology, whereas the effect of UDCA alone was mainly on laboratory values. Studies with longer follow-up using a combination of budesonide and UDCA are warranted to confirm safety and effects.