Background & Aims Corticosteroids are now widely accepted as a treatment for autoimmune pancreatitis (AIP). However, the molecular mechanism by which steroid treatment improves AIP remains largely unknown. The aim of this study was to elucidate cellular mechanisms by which corticosteroids improve both pancreatic exocrine function and histopathology in AIP. Methods Pancreatic exocrine function was evaluated by the secretin-stimulated function test and pancreatic biopsy specimens were processed for histologic analysis at the time of diagnosis and 3 months after initiation of steroid treatment. Expression and localization of proteins was assayed by immunohistochemistry. Analysis of immunoglobulin (Ig)G4-positive plasma cells was used to verify inflammation in AIP. Results The number of IgG4-positive plasma cells in pancreatic sections was decreased by steroid treatment, indicating reduced inflammation. Fluid, bicarbonate (HCO 3 −), and digestive enzyme secretions all were impaired in most patients with AIP. Corticosteroids improved both HCO 3 − and digestive enzyme secretion. A large fraction of the cystic fibrosis transmembrane conductance regulator (CFTR), which plays a central role in pancreatic duct HCO 3 − secretion, was mislocalized to the cytoplasm of duct cells before treatment. Corticosteroids corrected the localization of CFTR to the apical membrane, accounting for the improved HCO 3 − secretion. Steroid treatment resulted in regeneration of acinar cells, accounting for restored digestive enzyme secretion. Conclusions Corticosteroids reduce inflammation and restore both digestive enzyme and HCO 3 − secretion in patients with AIP by regenerating acinar cells and correcting CFTR localization in pancreatic duct cells. Mislocalization of CFTR may explain aberrant HCO 3 − secretion in other forms of pancreatitis.