Thalidomide and its immunomodulatory analogues have numerous effects on the body's immune system, including potential anti-cancer and anti-inflammatory activities. Thalidomide is currently used experimentally to treat various cancers, dermatological, neurological and inflammatory diseases. This drug is approved in the USA for cutaneous manifestations of lepromatous leprosy and is in Phase III trials for multiple myeloma. Thalidomide and its analogues modulate the immune system in various ways. Some of these immunomodulatory activities, together with the anti-angiogenic, anti-proliferative and pro-apoptotic properties, are believed to mediate anti-tumor responses as observed in multiple myeloma and some solid tumors. The analogue lenalidomide has shown potential in treating the bone marrow disorders multiple myeloma and myelodysplastic syndrome, and is presently in Phase II and III trials, respectively.