Inhaled glucocorticoid treatment during the first 2 yr of life is controversial because this is a period of major structural remodeling of the lung. Rabbits received aerosolized budesonide (Bud; 250 mug/ml) or injected dexamethasone (Dex; 0.05 mg . ml(-1) . kg(-1)) between 1 and 5 wk of age. Treatment with Bud caused specific growth retardation of the lung. Dex but not Bud affected the mechanical properties of the lung parenchyma, when corrected for lung volume. Small peripheral airway walls in both glucocorticoid groups were thinner and had fewer alveolar attachment points with greater distance between attachments than controls, but collagen content was not affected by glucocorticoids. Dex led to reduced body weight, lung volume, alveolar number, and surface area. The alveolar size and number and elastin content, when related to lung volume, was not affected by Bud, suggesting normal structural development but inhibition of total growth. Arterial wall thickness and diameter were affected by Bud. This study demonstrates that developing lungs are sensitive to inhaled glucocorticoids. As such, the use of glucocorticoids in young infants and children should be monitored with caution and only the lowest doses that yield significant clinical improvement should be used.