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This article reviews data from animal and phase 2 clinical studies assessing the immunomodulatory effects and pharmacokinetics of CP-690,550 (now known as tofacitinib), as well as its efficacy and safety in patients with rheumatoid arthritis (RA). In two rodent models of arthritis, CP-690,550 produced dose-dependent decreases in signs of disease activity compared with untreated controls, reductions in histologically assessed inflammation and articular cartilage damage, and statistically significant reductions in interleukin-6 (IL-6) levels. CP-690,550 has rapid absorption and elimination, with time to peak concentration of about 1 hour and a terminal phase half-life of about 3 hours. Four phase 2 studies (12-week, double-blind, placebo-controlled Phase 2a proof-of-concept study of three doses of CP-690,550; 6-month, double-blind, placebo-controlled phase 2b study of six doses of CP-690,550; 6-month, double-blind, placebo-controlled Phase 2b study of five doses of CP-690,550 and adalimumab; and 12-week, double-blind, placebo-controlled Phase 2b study of four doses of CP-690,550 in Japan) found that CP-690,550 was effective as monotherapy and in combination with background methotrexate, and had a tolerable safety profile in patients with active RA. An ongoing open-label study of CP-690,550 (5 mg twice daily) showed sustained efficacy over 12 months and was well tolerated.