Leflunomide is a new disease modifying antirheumatic drug (DMARD) that inhibits lymphocyte proliferation by blocking dihydroorotate dehydrogenase (DHODH), the enzyme critical for the production of pyrimidine necessary for DNA synthesis. Through this mode of action, leflunomide inhibits the lymphocyte proliferation associated with the clonal expansion of T cells in rheumatoid arthritis (RA). In clinical trials, leflunomide was superior to placebo and comparable to sulfasalazine and methotrexate for improving both the signs and symptoms of RA. Leflunomide was also superior to placebo and sulfasalazine and comparable to methotrexate in overall improvement of physical function. Leflunomide was equivalent to methotrexate and sulfasalazine in retarding disease progression measured radiographically. Due to its unique mode of action in the treatment of RA, leflunomide shows value in combination therapy with methotrexate for patients refractory to methotrexate alone. The most common adverse reactions associated with leflunomide therapy include gastrointestinal symptoms, allergic reactions, reversible alopecia and elevated liver enzymes. Adverse events were generally mild to moderate, and resolved without complication. The results of phase II and phase III clinical trials indicate that leflunomide is a safe and efficacious drug for the treatment of RA.