Leflunomide (Arava^®, Aventis Pharmaceuticals) is an oral pyrimidine synthesis inhibitor with immunomodulatory and anti-inflammatory activity. This agent has demonstrated significant efficacy in the treatment of rheumatoid arthritis (RA) and psoriatic arthritis in randomised, double-blind, placebo-controlled trials. Both the efficacy and safety of leflunomide are maintained with long-term administration in patients with RA. Leflunomide compares favourably with other biological and non-biological agents used to treat RA in the incidence of adverse events and serious adverse events. Economic studies indicate that leflunomide is a cost-effective option in the treatment of RA. New investigations with leflunomide have focused mainly on combination regimens for the treatment of RA and the use of leflunomide in other inflammatory or autoimmune disorders.