The objective of this study was to review the mechanisms by which thrombomodulin (TM) may modulate inflammation. The data were taken from published research performed by other laboratories and our own experimental results. TM is a transmembrane glycoprotein receptor and cofactor for thrombin in the protein C anticoagulant system. Recent studies have revealed that TM has activities, both dependent and independent of either protein C or thrombin, that affect biological systems beyond the coagulation pathway. This review highlights recent insights, provided by in vitro and in vivo analyses, into how the unique structural domains of TM effectively modify coagulation, fibrinolysis, and inflammation in health and disease. A paradigm is presented to describe how these apparently distinct functions are integrated to maintain homeostasis under stress conditions. Finally, we explore the potential diagnostic and therapeutic utility of dissecting out the structure-function correlates of TM. We conclude that TM plays a central role in regulating not only hemostasis but also inflammation, thus providing a close link between these processes. Elucidation of the molecular mechanisms by which TM functions will likely provide novel targets for therapeutic intervention.