The sedative and anti-nausea drug thalidomide, which causes birth defects in humans, has been shown to have both anti-inflammatory and anti-oncogenic properties. The anti-inflammatory effect of thalidomide is associated with suppression of cytokine expression and the anti-oncogenic effect with inhibition of angiogenesis. It is presently unclear whether the teratogenic properties of thalidomide are connected in any way to the beneficial, anti-disease characteristics of this drug. The transcription factor NF-kappaB has been shown to be a key regulator of inflammatory genes such as tumor necrosis factor-alpha and interleukin-8. Inhibition of NF-kappaB is associated with reduced inflammation in animal models, such as those for rheumatoid arthritis. We show here that thalidomide can block NF-kappaB activation through a mechanism that involves the inhibition of activity of the IkappaB kinase. Consistent with the observed inhibition of NF-kappaB, thalidomide blocked the cytokine-induced expression of NF-kappaB-regulated genes such as those encoding interleukin-8, TRAF1, and c-IAP2. These data indicate that the therapeutic potential for thalidomide may be based on its ability to block NF-kappaB activation through suppression of IkappaB kinase activity.