The antiangiogenic activity of thalidomide (Thal), coupled with an increase in bone marrow angiogenesis in multiple myeloma (MM), provided the rationale for the use of Thal in MM. Previously, the direct anti-MM activity of Thal and its analogues (immunomodulatory drugs, IMiDs) on MM cells was demonstrated, suggesting multiple mechanisms of action. In this study, the potential immunomodulatory effects of Thal/IMiDs in MM were examined. It was demonstrated that Thal/IMiDs do not induce T-cell proliferation alone but act as costimulators to trigger proliferation of anti-CD3–stimulated T cells from patients with MM, accompanied by an increase in interferon-γ and IL-2 secretion. However, an increase in autologous T-cell killing of patient MM cells could not be demonstrated. A role for natural killer (NK)- and LAK-cell–mediated killing is suggested because IL-2–primed peripheral blood mononuclear cells (PBMCs) treated with Thal/IMiDs demonstrated significantly increased lysis of MM cell lines. Cold target inhibition assays suggested NK- rather than LAK-cell–mediated killing. Furthermore, this killing was not major histocompatibility complex-class restricted, and the depletion of CD56⁺ cells blocked the drug-induced MM cell lysis. It was significant that increased killing of patient MM cells by autologous PBMCs treated with Thal/IMiDs was also observed. Although the in vivo relevance of NK-cell–mediated MM cell killing is unknown, phenotypic analysis performed in MM patients receiving Thal therapy demonstrated an increase in CD3⁻CD56⁺cells in patients responding to therapy. Thus in vitro and in vivo data support the hypothesis that Thal may mediate its anti-MM effect, at least in part, by modulating NK cell number and function.