Novel discoveries in medicine have provided understanding of the mechanisms involved in the development and maintenance of pathologies, thereby leading to the identification of new therapeutic targets and consequently new drugs. Thalidomide, independently of its teratogenic effects, is one drug able to regulate the immune system. Deeper studies about thalidomide have started on the 90s, when some of its action mechanisms were elucidated. Following the initial description of high systemic TNF-α production in patients with erythema nodosum leprosum (ENL), and the reduction of TNF-α caused by the administration of thalidomide in these patients, the drug was shown to present multiple effects, making it difficult to understand the mechanism of its successful use in some pathologies. Such studies have extended the rational application of thalidomide to various disorders in which the participation of one or more factors modulated by the drug has been related. In this review, we describe some of the mechanisms of action of thalidomide, its collateral effects, and some of its pharmacodynamical properties. We also discuss the applications of the drug in various diseases, and especially in leprosy and multiple myeloma, on the basis of an extensive review of the literature.