Controversial effects of thalidomide for solid malignancies have been reported. In the present study, we evaluate the effects of thalidomide for transitional cell carcinoma (TCC), the most common type of bladder cancer. Thalidomide precipitates were observed when its DMSO solution was added to the culture medium. No precipitation was found when thalidomide was dissolved in 45% γ-cyclodextrin, and this concentration of γ-cyclodextrin elicited slight cytotoxicity on TCC BFTC905 and primary human urothelial cells. Thalidomide-γ-cyclodextrin complex exerted a concentration-dependent cytotoxicity in TCC cells, but was relatively less cytotoxic (with IC50 of 200 µM) in BFTC905 cells than the other 3 TCC cell lines, possibly due to upregulation of Bcl-xL and HIF-1α mediated carbonic anhydrase IX, and promotion of quiescence. Gemcitabine-resistant BFTC905 cells were chosen for additional experiments. Thalidomide induced apoptosis through downregulation of survivin and securin. The secretion of VEGF and TNF-α was ameliorated by thalidomide, but they did not affect cell proliferation. Immune-modulating lenalidomide and pomalidomide did not elicit cytotoxicity. In addition, cereblon did not play a role in the thalidomide effect. Oxidative DNA damage was triggered by thalidomide, and anti-oxidants reversed the effect. Thalidomide also inhibited TNF-α induced invasion through inhibition of NF-κB, and downregulation of effectors, ICAM-1 and MMP-9. Thalidomide inhibited the growth of BFTC905 xenograft tumors in SCID mice via induction of DNA damage and suppression of angiogenesis. Higher average body weight, indicating less chachexia, was observed in thalidomide treated group. Sedative effect was observed within one-week of treatment. These pre-clinical results suggest therapeutic potential of thalidomide for gemcitabine-resistant bladder cancer.