Chronic lung disease (CLD) of prematurity is an inflammatory disease with a multifactorial etiology. The importance of Ureaplasma urealyticum in the development of CLD is debated, and steroids produce some improvement in neonates with this disease. In the present study, the capability of U. urealyticum to stimulate rat alveolar macrophages to produce nitric oxide (NO), express inducible nitric oxide synthase (iNOS), and activate nuclear factor B (NF-B) in vitro was characterized. The effect of NO on the growth of U. urealyticum was also investigated. In addition, the impact of dexamethasone and budesonide on these processes was examined. We found that U. urealyticum antigen (4 × 10⁷ color-changing units/ml) stimulated alveolar macrophages to produce NO in a dose- and time-dependent manner (P < 0.05). This effect was further enhanced by gamma interferon (100 IU/ml; P < 0.05) but was attenuated by budesonide and dexamethasone (10⁴ to 10⁶ M) (P < 0.05). The mRNA and protein levels of iNOS were also induced in response to U. urealyticum and inhibited by steroids. U. urealyticum antigen triggered NF-B activation, a possible mechanism for the induced iNOS expression, which also was inhibited by steroids. NO induced by U. urealyticum caused a sixfold reduction of its own growth after infection for 10 h. Our findings imply that U. urealyticum may be an important factor in the development of CLD. The host defense response against U. urealyticum infection may also be influenced by NO. The down-regulatory effect of steroids on NF-B activation, iNOS expression, and NO production might partly explain the beneficial effect of steroids in neonates with CLD.