Leflunomide is a novel immunosuppressive compound that is effective in the treatment of animal models of autoimmune disease and human rheumatoid arthritis. The mechanism of action is unknown. Here we show that leflunomide blocked 1) increases in nucleolar size and number, 2) upregulation of the nuclear protein antigens (PCNA and Ki-67), 3) increases in uridine incorporation and total RNA and DNA content, 4) cell cycle progression and 5) proliferation in mitogen-stimulated rat spleen mononuclear cells and human peripheral blood mononuclear cells (HPBMC). Exogenous uridine reversed the leflunomide-dependent inhibition of the normal increase in total RNA and DNA content in mitogen-stimulated HPBMC and rat spleen cells. Uridine reversed the leflunomide-dependent inhibition of cell cycle progression in stimulated rat cell cultures. Either uridine or cytidine, which can be converted to uridine by cytidine deaminase, reversed the antiproliferative effect of leflunomide in HPBMC. Dihydroorotate accumulated in leflunomide-treated human T-lymphoblastoid cells, suggesting that the compound inhibited the fourth enzyme in the pyrimidine biosynthetic pathway, dihydroorotate dehydrogenase. The results support the hypothesis that the in vitro effects of leflunomide on T-lymphocytes are due to inhibition of de novo pyrimidine synthesis.