Baricitinib is a novel active pharmaceutical ingredient used in the treatment of rheumatoid arthritis, and it acts as an inhibitor of Janus kinase. During the synthesis of baricitinib, three unknown impurities were identified in several batches between 0.10 and 0.15% using high-performance liquid chromatography. The unknown compounds were isolated and identified as N-((3-(4-(7H-pyrrolo[2,3-d]pyrimidin-4-yl)-1H-pyrazol-1-yl)-5-oxotetrahydrofuran-3-yl)methyl)ethane sulfonamide (lactone impurity, BCL), 2-(3-(4-(7H-[4,7′-bipyrrolo[2,3-d]pyrimidin]-4′-yl)-1H-pyrazol-1-yl)-1-(ethylsulfonyl)azetidin-3-yl)acetonitrile (dimer impurity, BCD), and 2-(1-(ethylsulfonyl)-3-(4-(7-(hydroxymethyl)-7H-pyrrolo[2,3-d]pyrimidin-4-yl)-1H-pyrazol-1-yl)azetidin-3-yl) acetonitrile (hydroxymethyl, BHM). These compounds were synthesized and confirmed against the isolated samples. The structures of all the three impurities were confirmed by extensive analysis of 1H NMR, 13C NMR, and mass spectrometry. The lactone impurity formation was explained by a plausible mechanism. The outcome of this study was very useful for scientists working in process as well as in formulation development. To synthesize highly pure baricitinib drug substance, these impurities can be used as reference standards due to their potential importance.