Indoleamine 2,3-dioxygenase (IDO) is an interferon (IFN)-gamma-inducible, extrahepatic enzyme that catalyses the initial and rate-limiting step in the degradation of the essential amino acid tryptophan. Elevated tryptophan catabolism mediated by IDO is associated with a wide variety of human cancers and has historically been thought to be a tumoricidal consequence of IFN-gamma exposure. Evidence of a physiological requirement for IDO activity in protecting the allogeneic fetus from rejection by the maternal immune system has stimulated a radical shift in thinking about the role of IDO in cancer. Evidence now suggests that tumours can exploit IDO-mediated peripheral tolerance to promote immune escape. This review summarises key studies that implicate IDO as an important mediator of peripheral immune tolerance as well as the development of a promising new anticancer modality that incorporates the use of IDO inhibitors. The second part focuses on the current state of development of IDO inhibitory compounds as potential pharmaceutical agents.