The official (European) pharmacopeial assay for budesonide was found to be non-specific and non-stability-indicating when used to qualify several batches of pharmaceutical grade drug substance from different sources. In contrast, the most widely cited HPLC method in the literature was found to be specific and stability-indicating with respect to drug substance stored in the dry state. However, that method failed the pharmacopeia's assay system suitability requirements because of peak tailing. Moreover, it was unable to detect or resolve two major degradation products which resulted from drug storage in non-aqueous solution. A new stability-indicating HPLC method described here overcomes these problems. This method used a Hypersil C18 column with a mobile phase consisting of ethanol-acetonitrile phosphate buffer (pH 3.4; 25.6 mM) (2:30:68, v/v/v), a flow rate of 1.5 ml/min and UV detection at 240 nm. The purity of budesonide EP and its impurity profile (related substances) were tested using the new assay method, and the results compared to those from the two other methods described above. Solid-state and solution stressed stability samples were used to evaluate all methods. Using the novel method, the epimers of budesonide. their related impurities and degradation products were separated successfully. Validation studies demonstrated that the novel method possessed a linear UV response, good system precision and accuracy, high sensitivity and specificity for budesonide. The novel method will be used for future studies of budesonide's degradation kinetics.