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Glucocorticoids are widely used for the management of inflammatory bowel disease, albeit with known limitations for long-term use and relevant adverse effects. In turn, they have harmful effects in experimental colitis. We aimed to explore the mechanism and possible implications of this phenomenon. Regular and microbiota depleted C57BL/6 mice were exposed to dextran sulfate sodium (DSS) to induce colitis and treated with budesonide. Colonic inflammation and animal status were compared. In vitro epithelial models of wound healing were used to confirm the effects of glucocorticoids. Budesonide was also tested in lymphocyte transfer colitis. Budesonide (1–60 μg/day) exerted substantial colonic antiinflammatory effects in DSS colitis. At the same time, it aggravated body weight loss, increased rectal bleeding, and induced general deterioration of animal status, bacterial translocation and endotoxemia. As a result, there was an associated increase in parameters of sepsis, such as plasma NOx, IL-1β, IL-6, lung myeloperoxidase and iNOS, as well as significant hypothermia. Budesonide also enhanced DSS induced colonic damage in microbiota depleted mice. These effects were correlated with antiproliferative effects at the epithelial level, which are expected to impair wound healing. In contrast, budesonide had significant but greatly diminished deleterious effects in noncolitic mice or in mice with lymphocyte transfer colitis. We conclude that budesonide weakens mucosal barrier function by interfering with epithelial dynamics and dampening the immune response in the context of significant mucosal injury, causing sepsis. This may be a contributing factor, at least in part, limiting clinical usefulness of corticoids in inflammatory bowel disease.