The effect of intranasally administered corticosteroid (budesonide) on nasal symptoms, mode of respiration (nasal versus mouth breathing), and asthma was investigated in 37 asthmatic children who were mouth breathers because of chronic nasal obstruction. After a 2-wk run-in period, the children were allocated randomly to 4 wk of intranasal therapy with either budesonide (400 micrograms/day) or placebo spray. A double-blind, parallel design was used. Diaries for peak expiratory flow, asthma, and rhinitis symptom scores and degree of mouth breathing were recorded at home. Nasal eosinophilia, nasal airway resistance at a flow of 0.2 L/s (NAR0.2), and lung function at rest and after exercise challenge were assessed at the clinic immediately before and at end of the 4-wk treatment. Budesonide, when compared with placebo, significantly decreased nasal obstruction (p less than 0.05), secretion (p less than 0.01), and eosinophilia (p less than 0.02), as well as NAR0.2 (p less than 0.05) and mouth breathing (p less than 0.01). The improvement in nasal obstruction correlated closely to the changes in mouth breathing (r = 0.80, n = 17, p less than 0.001). Furthermore, intranasally administered budesonide resulted in less exercise-induced asthma (EIA) (p less than 0.02) and decreased cough and asthma severity significantly. Pulmonary mechanics were only marginally improved. The present study showed that intranasally administered budesonide is effective in the treatment of perennial allergic rhinitis. An attenuation of EIA and a tendency to less asthma after budesonide therapy suggest a decrease in bronchial reactivity, but the results gave no clear evidence of an association between nasal airway function and asthma.