Evidence is accumulating for the early sustained usage of disease-modifying anti-rheumatic drugs (DMARDs) in rheumatoid arthritis. Leflunomide was licensed for the treatment of rheumatoid arthritis in 1998. Postmarketing surveillance, case reports and observational studies have highlighted less common or unexpected adverse events. Therefore, it is appropriate that we review the benefit-risk profile of leflunomide after 10 years of widespread usage. A wide-based search of relevant literature was performed to formulate this assessment. The improvements in rheumatoid arthritis shown by double-blind, randomized controlled trials (RCTs) of leflunomide have now been shown to be maintained beyond 4 years in open-label extension studies. Leflunomide is comparable to methotrexate, but better than sulfasalazine at 24 months in only one study. However, tolerance in clinical practice research shows higher than expected withdrawal rates due to both toxicity and lack of efficacy when compared with methotrexate and placebo. Adverse events reported include gastrointestinal upset, hypertension, headache, hepatotoxicity and hair loss, as well as predisposition to infection and peripheral neuropathy. The incidence of gastrointestinal adverse effects for leflunomide is similar to sulfasalazine but higher than those seen with methotrexate. Serious drug-induced hepatotoxicity leading to hospitalization is rare (0.02%), but isolated fatalities from liver failure have been documented. It is considered likely, but not yet proven, that there may be an increased incidence of weight loss and interstitial lung disease with leflunomide. Leflunomide in combination with methotrexate or sulfasalazine is an effective regimen in RCTs utilizing placebo controls, but more research is needed to confirm its effectiveness in combination with other DMARDs, particularly biologicals. The active metabolite of leflunomide is teratogenic in animal studies and is also found in breast milk. Therefore, contraception is advised in both males and females of child-bearing potential. There are genetic, pharmacokinetic and biochemical reasons to explain variation in both patient response and adverse event profile. Hence, blood and blood pressure monitoring are recommended and therapeutic drug monitoring should be considered in clinical nonresponders. Leflunomide is an effective DMARD that sustains a clinical and radiological response comparable to sulfasalazine and methotrexate. However, adverse effects necessitate frequent monitoring. It should be used with caution in those of child-bearing potential and with pre-existing lung and liver disease.