Systemic and local inflammation is central to the pathophysiology of chronic obstructive pulmonary disease (COPD). Increased levels of inflammation have been linked to a more progressive course in COPD and have been shown to be present during an exacerbation. Decreases in inflammatory cytokines, C-reactive protein, and inflammatory cells have been observed with corticosteroid use, suggesting a possible mechanism for a therapeutic benefit of steroids. No available data support the routine use of systemic corticosteroids in stable COPD; however, short courses during exacerbations are likely to improve length of hospitalization, lung function, and relapse rate. Inhaled corticosteroids (ICS) decrease the rate of exacerbation and may improve the response to bronchodilators and decrease dyspnea in stable COPD. No study shows that ICS reduce the loss of lung function; however, recent data suggest a possible survival benefit when combined with long-acting beta agonists. There are limited data on the use of ICS in the treatment of acute exacerbations of COPD, and its role in this setting must be more clearly defined. The empiric use of systemic corticosteroids perioperatively represents another area of uncertainty. The role of pharmacogenetics in the metabolism of corticosteroids in COPD is evolving but may be partially responsible for the observed variability in patient responsiveness. The potential benefits of systemic or inhaled corticosteroid use must be weighed against the risk of known toxicities.