Background: To evaluate the association between asthma exacerbations and the decline in lung function, as well as the potential effects of an inhaled corticosteroid (ICS), budesonide, on exacerbation related decline in asthmatics. Methods: The START (inhaled Steroid Treatment As Regular Therapy in early asthma) study was a 3-year randomized, double-blind study in 7165 patients (5 to 66 years), with persistent asthma for <2 years, to determine whether early intervention with low dose inhaled budesonide prevents severe asthma related events (exacerbations requiring hospitalization or emergency treatment) and decline in lung function. Findings: There were 315 patients who experienced at least one severe asthma exacerbation, of which 305 were analyzable, 190 in the placebo group and 115 in the budesonide group. In the placebo group, the change in post-bronchodilator FEV₁ (percent predicted) from baseline to the end of the study, in patients who did, or did not, experience a severe exacerbation was -6.44% and -2.43% respectively (p<0.001). A significant difference was seen in both children and in adults, but not in adolescents. In the budesonide group, the change in the post-bronchodilator FEV₁% in patients who did, or did not, experience a severe exacerbation was -2.48% and -1.72% respectively (p=0.57). The difference in magnitude of reduction afforded by budesonide, in patients who experienced at least one SARE, compared to those who did not, was statistically significant (p=0.042). Interpretation: Severe asthma exacerbations are associated with a more rapid decline in lung function. Treatment with low doses of ICS is associated with an attenuation of the decline. Clinical Trial: ID# NCT00641914 registered at www.clinicaltrials.gov