Angiogenesis, in particular anti-angiogenesis, is an area of particular therapeutic interest in cancer treatment. Several anti-angiogenic agents are in the final stages of clinical trials. One of these agents, thalidomide, best known for its teratogenic potential, is showing promise against several tumor types. Thalidomide has been shown previously to require bio-activation to exert its anti-angiogenic effect in isolated blood vessels and endothelial cells. In this work, we confirmed these findings using the in utero chicken embryo chorioallantoic membrane (CAM) system. In particular, the anti-angiogenic effect of thalidomide is significantly enhanced by activation by human but not by rat liver microsomes. We also showed in the CAM assay that hydroxylation of thalidomide at either the 1′- or 5-position retained anti-angiogenic activity whereas its hydroxylation at the 4-position led to an inactive compound. We further demonstrated that thalidomide shows weak anti-proliferative activity against MDA-MB-231 human breast cancer cells in culture. Thalidomide showed slightly more anti-proliferative activity, however, against the SH-SY5Y human neuroblastoma and human umbilical vein endothelial cell (HUVEC) types. Furthermore, incubation of thalidomide with human liver microsomes added no additional anti-proliferative effect in these cell types versus thalidomide given alone. Finally, we report that none of the thalidomide metabolites tested had any anti-proliferative effect against the breast or neuroblastoma cells, but do possess appreciable anti-proliferative activity against the endothelial cells. In summary, this work suggests that hydroxylated thalidomide analogs based on putative metabolites of the drug possess significant anti-angiogenic activity and that exploring further derivatives of these as potential anti-angiogenic agents warrants further merit.