TNF-α mediates both protective and detrimental manifestations of the host immune response. Our previous work has shown thalidomide to be a relatively selective inhibitor of TNF-α production in vivo and in vitro. Additionally, we have recently reported that thalidomide exerts a costimulatory effect on T cell responses. To develop thalidomide analogues with increased anti-TNF-α activity and reduced or absent toxicities, novel TNF-α inhibitors were designed and synthesized. When a selected group of these compounds was examined for their immunomodulatory activities, different patterns of cytokine modulation were revealed. The tested compounds segregated into two distinct classes: one class of compounds, shown to be potent phosphodiesterase 4 inhibitors, inhibited TNF-α production, increased IL-10 production by LPS-induced PBMC, and had little effect on T cell activation; the other class of compounds, similar to thalidomide, were not phosphodiesterase 4 inhibitors and markedly stimulated T cell proliferation and IL-2 and IFN-γ production. These compounds inhibited TNF-α, IL-1β, and IL-6 and greatly increased IL-10 production by LPS-induced PBMC. Similar to thalidomide, the effect of these agents on IL-12 production was dichotomous; IL-12 was inhibited when PBMC were stimulated with LPS but increased when cells were stimulated by cross-linking the TCR. The latter effect was associated with increased T cell CD40 ligand expression. The distinct immunomodulatory activities of these classes of thalidomide analogues may potentially allow them to be used in the clinic for the treatment of different immunopathological disorders.