The efficacy of thalidomide in the treatment of erythema nodosum leprosum is a well established fact; there is also accumulating evidence of its therapeutic value in a number of other inflammatory and immune-mediated conditions. In addition, thalidomide has been shown to be an inhibitor of angiogenesis induced by basic fibroblast growth factor (bFGF). Nevertheless, its mechanism of action remains speculative. Using guinea pigs, orally administered thalidomide significantly enhanced the response of multinucleated foreign body giant cells (p<0.05) in subcutaneously implanted polyvinyl alcohol sponges. Furthermore, the drug exerted a dual effect in that it reduced vascular density (p<0.05), which was not abolished by recombinant human bFGF, and at the same time amplified the granulomatous response with and without bFGF (p<0.05 and p<0.01, respectively). The results of our experiments represent a further step toward understanding the mechanism of action of thalidomide, with implications for its potential use in wound healing and scar formation as well as in the control of tumorigenesis.