Thalidomide has been reported to be an effective agent for treatment of chronic graft-versus-host disease (CGVHD). To determine the efficacy of this agent in patients with refractory CGVHD a total of 80 patients who failed to respond to prednisone (PSE) or PSE and cyclosporine (CSA) were treated with thalidomide. Sixteen patients (20%) had a sustained response, 9 with a complete remission and 7 with a partial response. Twenty-nine patients (36%) had thalidomide discontinued because of side effects, which included sedation, constipation, neuritis, skin rash, and neutropenia. Side effects were reversible with drug discontinuation except for mild residual neuritis in one case. Rashes and neutropenia have not previously been reported as thalidomide side effects when used for CGVHD treatment. We conclude thalidomide is immunosuppressive and active in the treatment of CGVHD. A high incidence of reversible side effects limited dose intensity and reduced the number of patients who could benefit from treatment.