Corticosteroids are the most effective anti-inflammatory therapy for asthma and other chronic inflammatory and immune diseases. Recently new insights have been gained into the molecular mechanisms whereby corticosteroids suppress inflammation. Inflammation is characterised by the increased expression of multiple inflammatory genes that are regulated by proinflammatory transcription factors, such as nuclear factor-kappaB and activator protein-1. These transcription factors bind to and activate coactivator molecules, which acetylate core histones and switch on gene transcription. Corticosteroids suppress the multiple inflammatory genes that are activated in asthmatic airways mainly by reversing histone acetylation of activated inflammatory genes through binding of glucocorticoid receptors to coactivators and recruitment of histone deacetylase-2 (HDAC2) to the activated inflammatory gene transcription complex. Activated glucocorticoid receptors also bind to recognition sites in the promoters of certain genes to activate their transcription, resulting in secretion of anti-inflammatory proteins, such as mitogen-activated protein kinase phosphatase, which inhibits MAP kinase signalling pathways. Glucocorticoid receptors may also interact with other recognition sites to inhibit transcription, for example of several genes linked to their side effects. In some patients with steroid-resistant asthma there are abnormalities in GR signalling pathways. In chronic obstructive pulmonary disease (COPD) patients and asthmatic patients who smoke HDAC2 is markedly impaired as a result of oxidative and nitrative stress so that inflammation is resistant to the anti-inflammatory effects of corticosteroids. Corticosteroids are likely to remain the mainstay of asthma therapy and new therapeutic strategies may reverse the corticosteroid insensitivity in COPD and severe asthma.