Budesonide has been studied in patients with primary sclerosing cholangitis (PSC). This study was designed to evaluate the efficacy of oral budesonide on liver function tests in patients with PSC and pouchitis associated with ileal pouch-anal anastomosis (IPAA).The study group consisted of 18 pouch patients with underlying ulcerative colitis (UC) and PSC who were treated with 9mg daily of budesonide for their underlying pre-pouch ileitis and pouchitis for 1-3months followed by 3-6mg maintenance for another 9months. Demographic and clinical variables were analyzed.The mean age was 39.4±12.4years (range, 21–59years). There was no significant change in aspartate aminotransferase (AST) [median (interquartile range) (IQR) 32 (25, 43.8) vs. 35.5 (25.5, 53), p=0.35], alanine aminotransferase (ALT) [37.5 (25.5, 49.5) vs. 40 (30, 84.3), p=0.29], alkaline phosphatase [142.5 (98.5, 264.5) vs. 126 (94.3, 189.5), p=0.35], serum bilirubin [0.7 (0.4, 1.3) vs., 0.6 (0.4, 1.6), p=0.13] or albumin levels [4.3 (3.9, 4.4) vs. 4.2 (3.8, 4.4), p=0.22] at the end of the treatment period (1year). The revised Mayo Risk Score did not change significantly and three patients required evaluation for liver transplantation during treatment. There was a significant improvement in the endoscopy subscores in the afferent limb and pouch after a year of budesonide treatment (p=0.001).Oral budesonide appears to have no impact on liver function tests in pouch patients with PSC. However it significantly improved afferent limb and pouch inflammation in IPAA patients.