The objectives of the present study were to determine the use of inhaled corticosteroids (ICS) for treating recurrent bronchial obstruction (rBO) in young children up to 2 yrs of age and to assess possible modifying effects of ICS on lung function in young children with rBO. From an observational, noninterventional birth cohort of 3,754 newborn children (3,697 with complete questionnaire data by 2 yrs of age), 306 children with documented rBO by age 2 yrs (cases) were identified along with 306 matched controls. Two tidal flow/volume measurements were taken, one at presentation of disease (children were steroid naive) and one at 2 yrs of age (mean age 11.2 and 25.6 months, respectively), from: 21 cases who subsequently received ICS (ICS+); 33 who did not (ICS-); and in 15 controls. The mean +/- SD duration of ICS treatment was 10.3 +/- 6.5 months. The main outcomes were treatment with ICS and baseline ratio of time to peak expiratory flow/total expiratory time (tPTEF/tE). From the entire cohort, 77 children (2.1%) and 21% of children with rBO had received ICS by 2 yrs of age. Baseline tPTEF/tE was significantly lower at the first visit only in ICS+ as compared to ICS- subjects, as well as in ICS+ and ICS- as compared to controls. The mean difference in baseline tPTEF/tE from first to second visit was borderline statistically significant in the ICS+ group only and correlated significantly with duration of ICS treatment. The present observational cohort study demonstrated that one-fifth of young children with recurrent bronchial obstruction had received inhaled corticosteroids. Early inhaled corticosteroid treatment improved lung function by age 2 yrs, mostly in those with the longest duration of treatment.