Semilocal density functional approximations (DFAs) for the exchange-correlation energy suffer from self-interaction error, which is believed to be the cause of many of the failures of common DFAs, such as poor description of charge transfer and transition states of chemical reactions. The standard self-interaction correction (SIC) of Perdew and Zunger mends some of these failures but spoils such essential properties as thermochemistry and equilibrium bond lengths. The Perdew-Zunger SIC seems to overcorrect many-electron systems. In this paper, we propose a modified SIC, which is scaled down in many-electron regions. The new SIC has an improved performance for many molecular properties, including total energies, atomization energies, barrier heights of chemical reactions, ionization potentials, electron affinities, and bond lengths. The local spin-density approximation (LSDA) benefits from SIC more than higher-level functionals do. The scaled-down SIC has only one adjustable parameter. Rationalization of the optimal value of this parameter enables us to construct an almost-nonempirical version of the scaled-down SIC-LSDA, which is significantly better than uncorrected LSDA and even better than the uncorrected generalized gradient approximation. We present an analysis of the formal properties of the scaled-down SIC and define possible directions for further improvements. In particular, we find that exactness for all one-electron densities does not guarantee correct asymptotics for the exchange-correlation potential of a many-electron system.