Thalidomide and its immunomodulatory derivatives have provided the most significant advance in the therapy of myeloma since the introduction of high dose chemotherapy followed by stem cell transplantation nearly 20 years ago. The mechanism of action of thalidomide is complex and involves many aspects of malignant plasma cell growth and bone marrow stromal cell microenvironment interaction. Thalidomide was first used because of its anti-angiogenic properties, however it is the immunomodulatory actions that involve increasing host tumour-specific immunosurveillance by both T cell and natural killer cells which may be the most important mode of action.