In the trial, led by a team from Oxford University, around 2,000 hospital patients were given dexamethasone and were compared with more than 4,000 who did not receive the drug.
For patients on ventilators, it cut the risk of death from 40% to 28%. For patients needing oxygen, it cut the risk of death from 25% to 20%.
Chief investigator Prof Peter Horby said: "This is the only drug so far that has been shown to reduce mortality - and it reduces it significantly. It's a major breakthrough."
Patients should be given the cheap drug without delay, after "fantastic" trial results, experts say.
www.bbc.com