Thalidomide was first evaluated in patients with refractory multiple myeloma in the mid-90s. Based on the promising results achieved in these patients, the drug was subsequently used in earlier stages of the disease. Meanwhile, numerous phase II studies have been published using different doses and treatment schedules of thalidomide. In order to enhance efficacy, combinations of thalidomide with dexamethasone, chemotherapy and interferon were tried in different settings. In these trials important data regarding the toxicity profile of thalidomide have also been collected. Several trials in newly diagnosed myeloma patients are still ongoing. In the future, the optimal dose of thalidomide and the best schedule in combination with dexamethasone or chemotherapy have to be defined.Thalidomide's mechanism of action is still unclear. There are, however, several hypotheses regarding its mode of action. Recently, several analogues of thalidomide-the so-called ImiDs, have been developed. Preclinical data indicate that they might be more effective and less toxic than thalidomide. Trials evaluating the ImiDs in the clinical setting are still ongoing. In this paper, we will review the available clinical data regarding efficacy and toxicity of thalidomide, discuss its possible mechanism of action and point to future directions of research and clinical development of the ImiDs.