Abstract:The locally rotationally symmetric (LRS) Bianchi type-II inflationary cosmological model is investigated for massless scalar field with flat potential and time varying Λ. To obtain the deterministic solution, it is assumed that scale factor is a(t)~eHt as we considered previously for Bianchi type-I spacetime and Λ~a?2 as considered by Chen and Wu, where H is the Hubble constant and effective potential V(φ)=const; φ Higg's field. It is shown that such a time varying Λ leads to no conflict with existing observations. However, it does change the predictions of standard cosmology in the matter-dominated phase and alleviates some problems in reconciling observations with the inflationary scenario. The model represents anisotropic spacetime in general. However, the model isotropizes for large values of t and β=3H2, where β is constant. The physical and geometrical aspects of the model in the context of an inflationary scenario is also discussed.