Recent studies suggest that use of inhaled corticosteroids (ICS) in chronic obstructive pulmonary disease (COPD) may be associated with a higher incidence of pneumonia. However, it is unclear whether COPD subjects on ICS who develop pneumonia have worse outcomes. Therefore, our aim was to examine the association of prior outpatient ICS therapy with mortality in hospitalised COPD subjects with pneumonia. We included subjects ≥64 yrs of age, hospitalised with pneumonia in US Veterans Affairs hospitals, and assessed the association of ICS exposure with mortality for hospitalised COPD subjects with pneumonia in a covariate-adjusted regression model. We identified 6,353 subjects with a diagnosis of pneumonia and prior COPD, of whom 38% were on ICS. Mortality was 9% at 30 days and 16% at 90 days. In regression analyses, outpatient ICS therapy was associated with lower mortality at both 30 days (OR 0.76, 95% CI 0.70-0.83), and 90 days (OR 0.80, 95% CI 0.75-0.86). Outpatient therapy with ICS was associated with a significantly lower 30- and 90-day mortality in hospitalised COPD patients with pneumonia.