To evaluate the efficacy of nebulized budesonide compared to oral prednisolone early in the emergency room management of acute asthma, we conducted a double-blind, placebo-controlled trial. Eighty children, 2 years to 12 years of age, with acute moderate attacks of asthma, were randomized into two groups. One group received nebulized salbutamol (0.15 mg/kg) and placebo at half-hourly intervals for three doses, and a single dose of oral prednisolone (2 mg/kg) (prednisolone group) and other group received three doses of nebulized salbutamol and budesonide (800 microg) at half-hourly intervals and a single dose of placebo tablets (budesonide group). The baseline characteristics of the two groups were similar, but after three doses of nebulization oxygen saturation, respiratory rate, pulmonary index and respiratory distress score were significantly improved in the budesonide group compared to prednisolone group (p < 0.01). The proportion of patients who were fit for discharge at the end of 2 h after the third dose of nebulization was significantly higher in the budesonide group than in the prednisolone group (22/ 41, 54% vs 7/39, 18%, p < 0.001). The data suggest that a combination of nebulized salbutamol and budesonide should be preferred in the emergency room management of children with acute moderate to severe exacerbation of asthma and who are not on prior oral or inhaled steroid therapy.