Thrombomodulin (TM) is a membrane-bound glycoprotein receptor r thrombin in the protein C activation pathway. Since its discovery in the 1980s as an anticoagulant protein, recent data suggest that TM plays an important role in modulating cellular proliferation, adhesion and inflammation. A soluble TM fragment has been produced with recombinant DNA technology that can bind thrombin and activate protein C. Soluble TM has received much attention because of its potential clinical applications. This article will examine recent advances in the understanding of TM's novel physiological function and review the molecular mechanisms of TM's anti-inflammatory effect. This review will also summarize TM data generated from animal studies and clinical trials to date and will focus on the role of TM in treating thrombotic, atherosclerotic and other inflammation-related diseases. These emerging data show that soluble TM is a promising agent that may provide potential therapies to modulate the pathophysiological process of atherothrombotic and other inflammatory diseases in the near future.