Thalidomide, after being banned from the market in the early 1960s because of the worldwide teratogenesis disaster, is currently being rediscovered because of its multiple therapeutic effects in various serious diseases and symptoms. Original studies examined the anxiolytic, mild hypnotic, anti-emetic and adjuvant analgesic properties of this drug. Subsequently, thalidomide was found to be highly effective in managing the cutaneous manifestations of leprosy (erythema nodosum leprosum) and even to be superior to aspirin (acetylsalicylic acid) in controlling leprosy-associated fever. Recent research shows promising results with thalidomide in patients with progressive bodyweight loss related to advanced cancer and HIV infection. Thalidomide therapy of diseases such as tuberculosis, sarcoidosis, aphthous ulcers in HIV syndrome and Behcet's disease, rheumatoid arthritis, multiple myeloma, graft-versus-host disease, pyoderma gangrenosum, inflammatory bowel disease, Sjögren's syndrome, lupus erythematosus and a variety of solid tumours is currently being explored. Furthermore, in preliminary studies, thalidomide has been found to be effective in several syndromes related to advanced cancer, such as the cancer cachexia syndrome, chronic nausea, insomnia, profuse sweating and pain. Whether thalidomide has a therapeutic effect on neoplastic fever has yet to be elucidated. These intriguing features make the use of the drug potentially attractive for palliative care. In addition, by a distinct mechanism of action compared with most other drugs, thalidomide offers the possibility of combined treatment with other agents with non-overlapping toxicities. The mechanism of action of thalidomide is probably based on the suppression of tumour necrosis factor-alpha and the modulation of interleukins. However, it is not possible to identify a single dominant mechanism, since the action of cytokines and the effect of thalidomide appear to be complex. This review article discusses the original uses and teratogenic effects of thalidomide within its historical context and, linking recent research at the molecular level with clinical findings, aims to provide the reader with insight into the current understanding of its biological actions, toxicities and potential benefits.