There is a need for safe and effective therapies for inflammatory skin diseases. Current topical and systemic treatment of psoriasis is effective but suffers from side-effects or is inconvenient. The therapeutic armamentarium for atopic dermatitis is very limited and far from satisfactory. In vivo preclinical data are presented for SDZ ASM 981, a novel ascomycin macrolactam derivative with high anti-inflammatory activity. Anti-inflammatory activity was observed in mouse, rat and pig models of allergic contact dermatitis. In the pig model, topical SDZ ASM 981 was as effective as the ultrapotent corticosteroid clobetasol-17-propionate, and when compared with a series of commercial topical corticosteroid preparations, 0.1% SDZ ASM 981 had equivalent efficacy to clobetasol-17-propionate (0.05%), the most potent product on the market. Unlike the corticosteroid, however, SDZ ASM 981 did not cause skin atrophy in pigs. SDZ ASM 981 potently inhibited allergic contact dermatitis in mice and rats when given systemically, and oral treatment was more effective than cyclosporin A in rats. Furthermore, SDZ ASM 981 has a low potential for affecting systemic immune responses, as demonstrated in rat models of localized graft vs. host reaction and allogeneic kidney transplantation. Preclinical results suggest that SDZ ASM 981 has the potential to be a well-tolerated and effective drug for topical as well as oral treatment of inflammatory skin diseases.