Eighty six children with troublesome wheezing were studied, in a semiprospective clinical trial with the patients acting as their own controls, to assess the efficacy and cost effectiveness of inhaled steroids. Improvement in school attendance, hospitalisations, breakthrough wheezing, and acute severe attacks were used to assess clinical efficacy. Expenditure for the family, on a cost of illness framework, before and after treatment, was used to estimate cost effectiveness. Highly significant numbers of patients showed improvement in clinical parameters, confirming efficacy. Mean monthly cost before inhaled steroid treatment was Rs 2652.33 (36.33 pounds) and Rs 449.42 (6.16 pounds) after starting treatment. The mean cost per unit satisfaction (cost utility value) which was Rs 255.54 (3.50 pounds) before starting prophylaxis came down to Rs 5.42 (0.07 pound) after starting treatment. There are no previous reports of cost-benefit assessment of inhaled steroids in childhood asthma. It is concluded that, even for developing countries with financial constraints, inhaled steroid treatment for prophylaxis of asthma is a cost effective and rational form of treatment.