The large reservoir of human latent tuberculosis (TB) contributes to the global success of the pathogen, Mycobacterium tuberculosis (Mtb). We sought to test whether aerosol infection of rabbits with Mtb H37Rv could model paucibacillary human latent TB. The lung burden of infection peaked at 5 weeks after aerosol infection followed by host containment of infection that was achieved in all rabbits. One-third of rabbits had at least one caseous granuloma with culturable bacilli at 36 weeks after infection suggesting persistent paucibacillary infection. Corticosteroid-induced immunosuppression initiated after disease containment resulted in reactivation of disease. Seventy-two percent of rabbits had culturable bacilli in the right upper lung lobe homogenates compared to none of the untreated controls. Discontinuation of dexamethasone led to predictable lymphoid recovery, with a proportion of rabbits developing multicentric large caseous granuloma. The development and severity of the immune reconstitution inflammatory syndrome (IRIS) was dependent on the antigen load at the time of immunosuppression and subsequent bacillary replication during corticosteroid-induced immunosuppression. Clinically, many aspects were similar to IRIS in severely immunosuppressed HIV-infected patients who have functional restoration of T cells in response to effective (highly active) antiretroviral therapy. This corticosteroid model is the only animal model of the IRIS. Further study of the rabbit model of TB latency, reactivation and IRIS may be important in understanding the immunopathogenesis of these poorly modeled states as well as for improved diagnostics for specific stages of disease.