The molecular activity of thalidomide comprises a wide range of mechanisms. Alteration of cytokine synthesis and release may be as important as changes in lymphocyte trafficking and leukocyte migration. Since endothelial cells play an important role in leukocyte extravasation and maintenance of inflammatory processes in the affected tissue, thalidomide-induced alterations of cellular adhesion molecules, and consequently changes of interaction of leukocytes with the endothelial cell layer, will result in modulation of the response in inflammation and immunity. Thalidomide mainly reduces tumor necrosis factor (TNF)-alpha production by macrophages, and its TNF alpha antagonist properties explain the beneficial effects in several TNF alpha-associated complications of severe diseases. Pathophysiologically relevant alterations most likely include gene regulatory effects, with interference in growth factor-dependent pathways known to be involved in teratogenesis, and effects on the transcriptional control of the inflammatory response via nuclear factor (NF)-kappa B. The effects of thalidomide, its enantiomers and analogs, on a broad range of diseases, and their differential pharmacokinetic and pharmacodynamic properties, give the scope for ongoing investigations in the search for analogs with better selectivity but without thalidomide-related side effects and teratogenicity.