Although thalidomide was withdrawn in the 1960s after its teratogenic property was recognized, it was subsequently found that this drug possesses immunomodulatory and anti-inflammatory effects. Recent studies have also demonstrated that thalidomide has antineoplastic activity via an antiangiogenic mechanism. Observations in the late 1990s that the microenvironment in the bone marrow plays a role in tumor progression in multiple myeloma provided an impetus to use thalidomide for the treatment of this disease. It is known that thalidomide monotherapy is effective in one-third of refractory cases, and in combination with glucocorticoids and/or antineoplastic drugs, thalidomide provides a response rate of more than 50%. Thus, thalidomide therapy is considered a standard approach for the treatment of relapsed and refractory myeloma. The exact mechanism of the antimyeloma effect of thalidomide is not yet clearly understood. Anti-angiogenic effects, direct activity in tumor cells such as the induction of apoptosis or G1 arrest of the cell cycle, the inhibition of growth factor production, the regulation of interactions between tumor and stromal cells, and the modulation of tumor immunity have been considered as possible mechanisms. In addition to its teratogenicity, the adverse effects of thalidomide have been general symptoms such as somnolence and headache, peripheral neuropathy, constipation, skin rash, and other symptoms. Although these adverse effects are generally reversible and mild, grade 3 and 4 toxicities such as peripheral neuropathy, deep venous thrombosis, neutropenia, and toxic dermal necrosis have occasionally been reported. The application of thalidomide therapy in patients with multiple myeloma is being broadened to include not only cases of refractory myeloma, but also previously untreated cases, as well as for maintenance therapy after hematopoietic stem cell transplantation and for the treatment of other hematological diseases. The safe use of this drug will depend on the establishment of diagnostic and treatment guidelines. In addition, the establishment of a nation-wide regulation system is urgently needed in Japan.