1 Employing rat femoral head cartilage implanted in a 6 day old mouse air pouch, the effects of inflammatory stimuli (i.e. cotton pellets, carrageenan, zymosan) on the loss of proteoglycan and collagen and granuloma formation have been studied. 2 Wrapping of the cartilage in cotton resulted in granuloma formation with accelerated loss of proteoglycan and collagen over the 14 day implantation period. The amount of loss increased with increasing weight of cotton. 3 The effects of different classes of anti-rheumatic drugs on granuloma formation and proteoglycan and collagen loss from cotton wrapped femoral head cartilage in the mouse air pouch have been studied. 4 Non-steroidal anti-inflammatory drugs (NSAIDs) had no influence on granuloma formation, but in general accelerated the rates of proteoglycan and collagen loss. 5 Dexamethasone and prednisolone significantly reduced granuloma formation and had a marked protective effect on cartilage breakdown. 6 Of the slow acting anti-rheumatic drugs examined, only gold sodium thiomalate (GSTM) and dapsone significantly decreased cartilage loss, with an accompanying modest decrease in granuloma formation. 7 The immunosuppressants cyclophosphamide and methotrexate, but not azathioprine, reduced cartilage degradation, but had no effect on granuloma formation. 8 The results for the different classes of anti-inflammatory and anti-rheumatic drugs are discussed in relation to their effects in other animal models and their reported therapeutic activities in man. It is concluded that the mouse air pouch method as described offers advantages as an animal model over existing procedures to predict therapeutic efficacy in man.