The study aimed to develop and evaluate budesonide inhalation micro‐suspension to target inflammation in the lower trachea and bronchi. Initially, the slurry phase is prepared by dispersing the drug (0.25 and 0.5 mg ml−1) in the Water for Injection with polysorbate 80. The slurry is mixed with the aqueous phase comprising other excipients. The mixture is further subjected to the treatment with homogenizer. The prepared formulations are subjected to various physio‐chemical analysis like description, density, pH, osmolality, viscosity, shelf life, impurities, assay, particle size, etc. Andersen cascade impactor is used to estimate the aerodynamic performance. In vivo analysis is initiated with the induction of Asthma in Sprague Dawley rats by ovalbumin challenge intranasally and the treatment is given with the aid of a nebulizer. Lastly, the biochemical estimations are carried out in blood and bronchoalveolar lavage fluid (BALF). The lungs are also subjected to morphological and histological evaluations. The physio‐chemical and analytical examination indicated a stable formulation that is compliant with the standard guidelines. The D90 value of the test formulation is ≤4.5 µm. Cascade impactor evaluation estimated almost, 2–10% higher amount of budesonide reaching the target region as compared to the marketed product. Test formulation attenuated the manifestation of ovalbumin‐induced asthma through suppression of inflammatory cell count in blood and BALF, and modulation of Lactate dehydrogenase and Alkaline Phosphatase levels which is further confirmed by histopathological analysis. The formulated budesonide micro‐suspension demonstrated stability, safety, and efficient delivery to the target site.