Fourteen patients with early sarcoidosis were prospectively studied over a period of 12-24 months. After baseline physiologic measurements they were treated with 40 mg of prednisone daily for 8 weeks and the measurements were repeated. Thereafter, the steroid dosage was reduced to 0-10 mg every other day and the measurements were repeated between the 12th and 24th month. Relatively normal lung volumes (VC, FRC, RV, TLC) and low DLCO increased with 8-week intensive steroid treatment and fell to below the pretreatment levels when the steroid was either tapered or stopped. The Vmax50-air, Vmax50-He, FEF25-75, upstream conductance (Gus) increased during intensive treatment whereas the RL fell and the FEV1/FVC ratio did not change. The CC/TLC, CV/VC, delta N2, CLdyn/CLst, delta Vmax50 were abnormal in many patients and did not change after 8 weeks of steroid treatment. We concluded that the obstructive defect is common in early sarcoidosis, predominantly in small airways and patchy in nature; the functional derangement is always improved by intensive and adequate steroid therapy and worsened when the drug is tapered or stopped.