Budesonide, an inhaled glucocorticoid, is used for the treatment of large and small calibre airway inflammation associated with asthma. Conventional dry powder inhalers (DPIs) show least deposition efficiency in the lung due to agglomeration, increased particle size and minimum fluidisation. There is a need for controlled release budesonide DPI in order to improve maximum lung deposition with least toxicity and improve patient compliance. Budesonide loaded biopolymer based microparticles were prepared by controlled gelation of sodium alginate using calcium chloride and chitosan. Microparticles were evaluated for physical characteristics, in vitro lung deposition by Andersen cascade impactor and in vivo regional lung deposition by fabricated apparatus with measured respiratory minute volume of rats from plethysmography. The effect of DPI on the histology of lung tissues was also studied. The particle size, encapsulation efficiency, zeta potential, mass median aerodynamic diameter and fine particle fraction of the DPI were 3.059 +/- 0.03 mu m, 87.16 +/- 1.11%, -17.5 mV, 1.16 +/- 0.01 mu m and 56.18 +/- 0.01% respectively, which revealed the potential for pulmonary delivery. Formulation demonstrated a 14-fold increased drug deposition in the lung as compared to commercial DPI indicating pulmonary targeting potential. The formulation showed the controlled drug release up to 24 h. The histopathology revealed safety of the formulation. Developed DPI markedly improved regional lung deposition and safety of budesonide. This technology would facilitate the administration of glucocorticoid in the clinical testing.