Adenosine has been considered as a potential immunomodulatory and neuroprotective agent for 30 years. Inosine, a major degradation product of adenosine, was thought originally to have no biological effects. However, recent studies demonstrate that inosine has potent immunomodulatory and neuroprotective effects. Inosine enhances mast-cell degranulation, attenuates the production of pro-inflammatory mediators by macrophages, lymphocytes and neutrophils, and is protective in animal models of sepsis, ischemia–reperfusion and autoimmunity. Inosine preserves the viability of glial cells and neuronal cells during hypoxia, and stimulates axonal regrowth after injury. The biological actions of inosine might involve effects on adenosine receptors, poly(ADP-ribose) polymerase and cellular energy levels. In this article, we review recent observations indicating that it might be possible to exploit inosine therapeutically for the treatment of tissue damage caused by inflammation and ischemia.