TNF-alpha converting enzyme (TACE) is a validated therapeutic target for the development of oral tumor necrosis factor-alpha (TNF-alpha) inhibitors. Here we report the pre-clinical results and characterization of a selective and potent TACE inhibitor, (2R, 3S)-2-([[4-(2-butynyloxy)phenyl]sulfonyl]amino)-N,3-dihydroxybutanamide (TMI-2), in various in vitro and in vivo assays. TMI-2 is a potent TACE inhibitor in an enzymatic FRET assay (IC50=2 nM). It is more than 250-fold selective over MMP-1, -7, -9, -14, and ADAM-10 in vitro. In cell-based assays and human whole blood, TMI-2 inhibits lipopolysaccharide (LPS)-induced TNF secretion with IC50s<1 uM. Importantly, TMI-2 inhibits the spontaneous release of TNF-alpha in human synovium tissue explants of rheumatoid arthritis patients with an IC50 of 0.8 microM. In vivo, TMI-2 potently inhibits LPS-induced TNF-alpha production in mice (ED50=3 mg/kg). In the adjuvant-induced arthritis (AIA) model in rats, treatment with TMI-2 at 30 mg/kg and 100 mg/kg p.o. b.i.d. was highly effective in reducing joint arthritis scores. In a semi-therapeutic collagen-induced arthritis (CIA) model in mice, TMI-2 is highly effective in reducing disease severity scores after oral treatment at 100 mg/kg twice per day. In summary, TMI-2 is a potent and selective TACE inhibitor that inhibits TNF-alpha production and reduces the arthritis scores in pre-clinical models. TMI-2 represents a novel class of TACE inhibitors that may be effective and beneficial in the treatment of rheumatoid arthritis as well as other TNF-mediated inflammatory autoimmune diseases.