The Teratogenic properties of Thalidomide, in addition to its efficacy in the treatment of Multiple Myeloma, are dependent on Cereblon. Importantly however, the role of Cereblon in mediating Thalidomide’s anti-inflammatory properties remains unclear. Using shRNA knockdown we show that Cereblon functions critically in TLR induced signal transduction. Furthermore, we show that under physiological conditions a proportion of total cellular Cereblon exists in complex with Rabex-5, a mediator of endosomal transport. This interaction was found to be dependent on the Rabex-5 N terminal ubiquitin binding domain. Significantly, the Thalidomide derivative Pomalidomide was shown to reduce the association of Cereblon with Rabex-5. We further show that Pomalidomide inhibits TRIF/IRF3 dependent gene induction and that both Cereblon and Rabex-5 function critically in this pathway. These findings clearly indicate that the anti-inflammatory properties of Thalidomide derivatives result from interference with the function of Cereblon and Rabex-5 in TLR induced signal transduction. We anticipate that further investigation of the relationship between Cereblon and Rabex-5 will inform our understanding of Thalidomide and its derivatives in other contexts. Moreover, the identification of Cereblon as a critical regulator of the TLR signalling apparatus will reveal novel aspects of signal transduction and contribute to our understanding of innate immunity.