Lenalidomide, an IMiD drug (a novel type of immunomodulating drug) was recently approved by the US Food and Drug Administration for the treatment of transfusion-dependent anemia in patients with myelodysplastic syndromes (MDS) and interstitial deletions of chromosome 5q [del(5q)]. This review examines the clinical experience from the MDS-001 and MDS-003 clinical trials that led to this approval, the results of biological correlates supporting the targets of drug action, and the results from a non-del(5q) multicenter study (MDS-002). Lenalidomide treatment resulted in both erythroid and cytogenetic responses in the majority of patients with del(5q), accompanied by reductions in inflammatory cytokine generation and marrow microvessel density and improvement in primitive hematopoietic progenitor recovery. Central pathology review showed that resolution of cytologic dysplasia was common in patients with del(5q) but was infrequent in erythroid-responding patients without the chromosome 5 deletion. These findings indicate that lenalidomide promotes erythropoiesis in lower-risk MDS, with two apparently distinct mechanisms of action: suppression of the ineffective del(5q) clone and promotion of effective erythropoiesis in non-del(5q) MDS progenitors. These studies identified lenalidomide as a highly active erythropoietic- and cytogenetic-remitting agent in lower-risk MDS patients who otherwise would not be expected to benefit from recombinant erythropoietin therapy. The most common adverse reactions include dose-dependent neutropenia and thrombocytopenia that are more pronounced in patients with del(5q) in whom early suppression of the clone is expected.