Myelodysplastic syndrome (MDS) comprises a spectrum of heterogeneous diseases. Most patients present with ineffective hematopoiesis. The pathophysiology involves immune-mediated effects, cytokine dysregulation, and apoptosis, among others. We treated 14 transfusion-requiring patients with MDS, 10 with refractory anemia (RA) and four with RA with excess blasts (RAEB) with a 4-day course of antithymocyte globulin (ATG) followed by intermittent etanercept for 4 months. Among 13 evaluable patients, five are red blood cell and platelet transfusion independent for intervals extending beyond 2 years, and two have normalized their peripheral blood parameters. One additional patient showed a transient rise of platelet and neutrophil counts, for an overall response rate of 46%. Responding patients showed striking improvements in marrow cell abnormalities as characterized by flow cytometry. These data show that a combination of ATG plus etanercept offers effective palliative therapy for unselected patients with MDS. Further trials incorporating these two agents are warranted.