Role of inhaled corticosteroids (ICS) in COPD is a controversial subject. Studies have reported conflicting results on the effect of ICS therapy in COPD. This study aims to assess the role of inhaled Corticosteroid (Budesonide-400ug) in the management of COPD. METHODS: Fifty Patients with newly diagnosed Stage 3 or 4 COPD as per Gold guideline were selected. Baseline FEV1, number of hospitalisation and exacerbations were entered. The patients were randomly assigned to receive Long acting beta2 agonist (LABA) (FORMOTEROL 6ug) + long acting muscarinic antagonist (LAMA) (TIOTROPIUM 18ug) + placebo or (FORMOTEROL 6ug) + (TIOTROPIUM 18ug) + Inhaled corticosteroid (ICS) (BUDESONIDE400ug). All drugs were given as metered dose inhalers with spacer. Patients were reviewed after one year and reassessed FEV1, number of exacerbations and hospitalisation. Data was analysed with SPSS version16. Demographic and baseline parameters were comparable in both groups. Both treatments brought significant reduction in hospitalisation rate (p value -.002 and .009 respectively). But there was no difference between two groups with respect to hospitalisation rate (P value-.825). There was reduction in exacerbation rate in both treatment groups (p value .001 each). But the difference in exacerbation rate between two groups was not statistically significant (P value-.192). FEV1 was found to be declining in both treatment groups. Local side effects like oral candidiasis were more common in steroid group. The inhaled bronchodilators (LABA+LAMA), as well as inhaled bronchodilators with inhaled steroid (LAMA+LABA+ICS), bring significant reduction in exacerbation and hospitalisation rates of COPD. But the addition of inhaled steroid with bronchodilators does not bring about any additional advantage in bringing down the exacerbation or hospitalisation rates further.