The effect of aerosolized terbutaline in a dose of 32.5 micrograms and its placebo, administered in a double-blind fashion, was studied in 14 children with exercise-induced asthma (EIA) before and during a 4-wk treatment period with aerosolized steroid (budesonide, 400 micrograms/day). Effects were assessed from the changes in peak expiratory flow (PEF), forced expiratory volume in one second (FEV1), and forced expiratory flow (FEF25-75) before and after treadmill exercise challenge. Compared with placebo there was a significant improvement in pulmonary function after terbutaline. During budesonide therapy, pulmonary function improved further, but there was no enhancement of the response to terbutaline. Terbutaline alone, budesonide plus placebo, and budesonide plus terbutaline reduced the exercise-induced fall in FEV1 by 30, 51, and 84%, respectively. The effect of budesonide on EIA was delayed during the 4 wk of treatment as compared with the improvement in resting pulmonary function. The present results suggest that 1 to 4 wk of therapy with inhaled corticosteroids decreases the severity of EIA. Further, the combined effect of inhaled corticosteroid and beta-2 agonist on pulmonary function appears to be additive.