Leflunomide is a pyrimidine biosynthesis inhibitor that has recently been approved for treatment of rheumatoid arthritis. However, the mechanism of leflunomide's antiarthritis activity and is not fully understood. The critical role that TNF plays in rheumatoid arthritis led us to postulate that leflunomide blocks TNF signaling. Previously, we have demonstrated that leflunomide inhibits TNF-induced NF-kappaB activation by suppressing I-kappaBalpha (inhibitory subunit of NF-kappaB) degradation. We in this study show that leflunomide also blocks NF-kappaB reporter gene expression induced by TNFR1, TNFR-associated factor 2, and NF-kappaB-inducing kinase (NIK), but not that activated by the p65 subunit of NF-kappaB, suggesting that leflunomide acts downstream of NIK. Leflunomide suppressed TNF-induced phosphorylation of I-kappaBalpha, as well as activation of I-kappaBalpha kinase-beta located downstream to NIK. Leflunomide also inhibited TNF-induced activation of AP-1 and the c-Jun N-terminal protein kinase activation. TNF-mediated cytotoxicity and caspase-induced poly(ADP-ribose) polymerase cleavage were also completely abrogated by treatment of Jurkat T cells with leflunomide. Leflunomide suppressed TNF-induced reactive oxygen intermediate generation and lipid peroxidation, which may explain most of its effects on TNF signaling. The suppressive effects of leflunomide on TNF signaling were completely reversible by uridine, indicating a critical role for pyrimidine biosynthesis in TNF-mediated cellular responses. Overall, our results suggest that suppression of TNF signaling is one of the possible mechanisms for inhibitory activity of leflunomide against rheumatoid arthritis.