Background: Chorioamnionitis is associated with increased rates of bronchopulmonary dysplasia (BPD) in ventilated preterm infants. Budesonide when added to surfactant decreased lung and systemic inflammation from mechanical ventilation in preterm lambs and decreased the rates and severity of BPD in preterm infants. We hypothesized that the addition of budesonide to surfactant will decrease the injury from mechanical ventilation in preterm lambs exposed to intra-amniotic (IA) lipopolysaccharide (LPS). Methods: Lambs at 126 ± 1 day GA received LPS 10 mg IA 48 h prior to injurious mechanical ventilation. After 15 min, lambs received either surfactant mixed with: (1) saline or (2) Budesonide 0.25 mg/kg, then ventilated with normal tidal volumes for 4 h. Injury markers in the lung, liver, and brain were compared. Results: Compared with surfactant alone, the addition of budesonide improved blood pressures, dynamic compliance, and ventilation, while decreasing mRNA for pro-inflammatory cytokines in the lung, liver, and multiple areas of the brain. LPS caused neuronal activation and structural changes in the brain that were not altered by budesonide. Budesonide was not retained within the lung beyond 4 h. Conclusions: In preterm lambs exposed to IA LPS, the addition of budesonide to surfactant improved physiology and markers of lung and systemic inflammation. Impact: The addition of budesonide to surfactant decreases the lung and systemic responses to injurious mechanical ventilation preterm lambs exposed to fetal LPS.Budesonide was present in the plasma by 15 min and the majority of the budesonide is no longer in the lung at 4 h of ventilation.IA LPS and mechanical ventilation caused structural changes in the brain that were not altered by short-term exposure to budesonide.The budesonide dose of 0.25 mg/kg being used clinically seems likely to decrease lung inflammation in preterm infants with chorioamnionitis.