Abstract. The purpose of this research was to generate, characterize, and investigate the in vivo efficacy of budesonide (BUD) microparticles prepared by spray-drying technology with a potential application as carriers for pulmonary administration with sustained-release profile and improved respirable fraction. Microspheres and porous particles of chitosan (drug/chitosan, 1:2) were prepared by spray drying using optimized process parameters and were characterized for different physicochemical parameters. Mass median aerodynamic diameter and geometric standard deviation for conventional, microspheres, and porous particles formulations were 2.75, 4.60, and 4.30 µm and 2.56, 1.75, and 2.54, respectively. Pharmacokinetic study was performed in rats by intratracheal administration of either placebo or developed dry powder inhalation (DPI) formulation. Pharmacokinetic parameters were calculated (Ka, Ke, T max , C max , AUC, and Vd) and these results indicated that developed formulations extended half life compared to conventional formulation with onefold to fourfold improved local and systemic bioavailability. Estimates of relative bioavailability suggested that developed formulations have excellent lung deposition characteristics with extended T 1/2 from 9.4 to 14 h compared to conventional formulation. Anti-inflammatory activity of BUD and developed formulations was compared and found to be similar. Cytotoxicity was determined in A549 alveolar epithelial cell line and found to be not toxic. In vivo pulmonary deposition of developed conventional formulation was studied using gamma scintigraphy and results indicated potential in vitro-in vivo correlation in performance of conventional BUD DPI formulation. From the DPI formulation prepared with porous particles, the concentration of BUD increased fourfold in the lungs, indicating pulmonary targeting potential of developed formulations.