IgE plays an important role in allergic asthma. We hypothesized that reducing IgE in the airway mucosa would reduce airway inflammation. Forty-five patients with mild to moderate persistent asthma with sputum eosinophilia of 2% or more were treated with humanized monoclonal antibody against IgE (omalizumab) (n = 22) or placebo (n = 23) for 16 weeks. Outcomes included inflammatory cells in induced sputum and bronchial biopsies, and methacholine responsiveness. Treatment with omalizumab resulted in marked reduction of serum IgE and a reduction of IgE⁺ cells in the airway mucosa. The mean percentage sputum eosinophil count decreased significantly (p < 0.001) from 6.6 to 1.7% in the omalizumab group, a reduction significantly (p = 0.05) greater than with placebo (8.5 to 7.0%). This was associated with a significant reduction in tissue eosinophils; cells positive for the high-affinity Fc receptor for IgE; CD3⁺, CD4⁺, and CD8⁺ T lymphocytes; B lymphocytes; and cells staining for interleukin-4, but not with improvement in airway hyperresponsiveness to methacholine. This study shows antiinflammatory effects of omalizumab treatment and provides clues for mechanisms whereby omalizumab reduces asthma exacerbations and other asthma outcomes in more severe asthma. The lack of effect of omalizumab on methacholine responsiveness suggests that IgE or eosinophils may not be causally linked to airway hyperresponsiveness to methacholine in mild to moderate asthma.