Corticosteroids are the most effective anti-inflammatory therapy for many chronic inflammatory diseases, such as asthma but are relatively ineffective in other diseases such as chronic obstructive pulmonary disease (COPD). Chronic 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, that bind to and activate coactivator molecules, which then acetylate core histones to switch on gene transcription. Corticosteroids suppress the multiple inflammatory genes that are activated in chronic inflammatory diseases, such as asthma, mainly by reversing histone acetylation of activated inflammatory genes through binding of liganded glucocorticoid receptors (GR) to coactivators and recruitment of histone deacetylase-2 (HDAC2) to the activated transcription complex. At higher concentrations of corticosteroids GR homodimers also interact with DNA recognition sites to active transcription of anti-inflammatory genes and to inhibit transcription of several genes linked to corticosteroid side effects. In patients with COPD and severe asthma and in asthmatic patients who smoke HDAC2 is markedly reduced in activity and expression as a result of oxidative/nitrative stress so that inflammation becomes resistant to the anti-inflammatory actions of corticosteroids. Theophylline, by activating HDAC, may reverse this corticosteroid resistance. This research may lead to the development of novel anti-inflammatory approaches to manage severe inflammatory diseases.