Mycophenolic acid (MPA) is a potent, selective, noncompetitive and reversible inhibitor of inosine-5'-monophosphate deshydrogenase (IMPDH). By depleting guanosine and deoxyguanosine nucleotides in T and B lymphocytes it inhibits their proliferation and, hence, immunoglobin (Ig) production. MPA also suppresses dendritic cell maturation decreasing its capacity of antigen presentation to T lymphocytes. MPA reduces the recruitment of monocytes into sites of graft rejection and inflammation. Mycophenolate mofetil (MMF) is a prodrug of MPA that was developed to improve the bioavailability of MPA. After oral administration, MMF is completely metabolized to MPA. A major inactive metabolite, mycophenolic acid glucuronide (MPAG), is formed after MPA glucuronidation. MPAG has an important role in the enterohepatic recirculation of MPA. MMF is approved for the prophylaxis of allograft rejection after renal, cardiac or liver transplant. The oral dose ranges from 1.0-1.5 g/day twice daily. Moreover, studies on the use of MMF in lung and simultaneous pancreas/ kidney transplants have shown encouraging results. MMF also demonstrates potential in the treatment of autoimmune diseases such as lupus, myasthenia gravis and glomerular disorders. This review focuses on the molecular mechanism of action and pharmacological characteristics of MPA. Studies in both approved and nonapproved applications are also summarized.