Thalidomide is a relatively safe and efficacious form of therapy in the treatment of advanced, refractory multiple myeloma. Hepatotoxicity is listed as an extremely rare adverse effect associated with its use. We describe a 76-year-old woman with multiple myeloma who was treated with dexamethasone and thalidomide. By week 6 of therapy, she had developed acute increases in her aspartate aminotransferase (AST) and alanine aminotransferase (ALT) levels to more than 50 times the upper limit of normal. Her liver function test results had been within the normal ranges before and immediately after the start of therapy, and the patient had no known history of underlying liver disease. A liver biopsy specimen demonstrated evidence of acute injury with chronic changes of underlying steatosis and bridging fibrosis due to previously undiagnosed nonalcoholic steatohepatitis. Immediately after discontinuing thalidomide, her liver function test results began trending downward. Seven days later, her AST and ALT levels had improved to 86 and 165 U/L, respectively. This case and a limited number of other reports demonstrate severe hepatotoxicity as a rare but potentially serious adverse effect of thalidomide therapy. With the expanding use of thalidomide as a therapeutic agent, clinicians must recognize severe hepatotoxicity as a potential complication. Whether patients with preexisting liver disease are at increased risk when receiving thalidomide remains to be seen.