Thalidomide (Thd) is clinically useful in a number of conditions where its efficacy is probably related to its anti-TNF-alpha activity. More recently, Thd has also been shown to co-stimulate T cells and second generation co-stimulatory (IMiD trade mark ) analogues are currently being assessed in the treatment of cancer patients. However, in contrast to their known suppressive effects during inflammatory stimuli, the effects of Thd/IMiDs on TNF-alpha and TNF receptors (TNFRs) during T cell co-stimulation are not known. We sought to determine the effect of Thd, two clinically relevant IMiDs (CC-4047, ACTIMID trade mark and CC-5013, REVIMID trade mark ) and a non-stimulatory SelCID analogue (CC-3052) on TNF-alpha production and on the expression and shedding of TNFRs during co-stimulation. We found that co-stimulation of PBMC with Thd/IMiDs, but not CC-3052, prevented alphaCD3-induced T cell surface expression of TNFR2 and thereby reduced soluble TNFR2 (sTNFR2) levels. However, there was no effect on total (surface/intracellular) TNFR2 protein expression, suggesting inhibition of trafficking to the cell membrane. The extent of co-stimulation by Thd/IMiDs (assessed by CD69/CD25 expression and IL-2/sIL-2Ralpha production) was similar for CD4+ and CD8+ T lymphocytes and correlated with TNFR2 inhibition. Co-stimulation, but not the early inhibitory effect on TNFR2, was IL-2-dependent and led to increased TNF-alpha production by both CD4+ and CD8+ T lymphocytes. The clinical relevance of this observation was confirmed by the elevation of serum TNF-alpha during REVIMID trade mark treatment of patients with advanced cancer. Together, these results suggest a possible role for TNF-mediated events during co-stimulation and contrast with the TNF inhibitory effects of Thd and its analogues during inflammatory stimuli.