We review recent advances in the use of corticosteroids (CS) in pediatric lung disease. CS are frequently used, systemically or by inhalation. Their mechanisms of action in pulmonary diseases are ill defined. CS exert direct inhibitory effects on many inflammatory cells through genomic mechanisms. There is a time lag before clinical response, and the washout of effects is also prolonged. Prompt relief in some conditions, such as croup, may be related to airway mucosal vasoconstriction through a nongenomic mechanism. CS have proven beneficial roles in the treatment of asthma, croup, allergic bronchopulmonary aspergillosis, and subglottic hemangioma. In some conditions, such as bronchiolitis, cystic fibrosis, and bronchopulmonary dysplasia, their use is controversial and is not recommended routinely. In other conditions, such as tuberculosis, interstitial lung disease, acute lung aspiration, and acute respiratory distress syndrome, CS are often used empirically despite the lack of clear evidence of their benefit. New drug regimens, including the more flexible use of inhaled corticosteroids and long-acting β-agonists in asthma, the lack of efficacy of oral corticosteroids in preschool children with acute wheeze, the severe complications of systemic dexamethasone used to prevent bronchopulmonary dysplasia and thus more restricted use, and the beneficial effect of pulse high-dose intravenous methylprednisolone in patients with allergic bronchopulmonary aspergillosis or cystic fibrosis are among the major recent developments. There is concern about adverse effects, especially growth and adrenal suppression, induced by systemic CS in children. These have been reduced, but not eliminated, with the use of the inhaled route. The benefits must be weighed against the potential detrimental effects.