Abstract Objectives: To determine the effect of long term inhaled corticosteroids on lung function, exacerbations, and health status in patients with moderate to severe chronic obstructive pulmonary disease. Design: Double blind, placebo controlled study. Setting: Eighteen UK hospitals. Participants: 751 men and women aged between 40 and 75 years with mean forced expiratory volume in one second (FEV1) 50% of predicted normal. Interventions: Inhaled fluticasone propionate 500 μg twice daily from a metered dose inhaler or identical placebo. Main outcome measures: Efficacy measures: rate of decline in FEV1 after the bronchodilator and in health status, frequency of exacerbations, respiratory withdrawals. Safety measures: morning serum cortisol concentration, incidence of adverse events. Results: There was no significant difference in the annual rate of decline in FEV1 (P=0.16). Mean FEV1 after bronchodilator remained significantly higher throughout the study with fluticasone propionate compared with placebo (P<0.001). Median exacerbation rate was reduced by 25% from 1.32 a year on placebo to 0.99 a year on with fluticasone propionate (P=0.026). Health status deteriorated by 3.2 units a year on placebo and 2.0 units a year on fluticasone propionate (P=0.0043). Withdrawals because of respiratory disease not related to malignancy were higher in the placebo group (25% v 19%, P=0.034). Conclusions: Fluticasone propionate 500 μg twice daily did not affect the rate of decline in FEV1 but did produce a small increase in FEV1. Patients on fluticasone propionate had fewer exacerbations and a slower decline in health status. These improvements in clinical outcomes support the use of this treatment in patients with moderate to severe chronic obstructive pulmonary disease.