Transmembrane TNF-alpha, a precursor of the soluble form of TNF-alpha, is expressed on activated macrophages and lymphocytes as well as other cell types. After processing by TNF-alpha-converting enzyme (TACE), the soluble form of TNF-alpha is cleaved from transmembrane TNF-alpha and mediates its biological activities through binding to Types 1 and 2 TNF receptors (TNF-R1 and -R2) of remote tissues. Accumulating evidence suggests that not only soluble TNF-alpha, but also transmembrane TNF-alpha is involved in the inflammatory response. Transmembrane TNF-alpha acts as a bipolar molecule that transmits signals both as a ligand and as a receptor in a cell-to-cell contact fashion. Transmembrane TNF-alpha on TNF-alpha-producing cells binds to TNF-R1 and -R2, and transmits signals to the target cells as a ligand, whereas transmembrane TNF-alpha also acts as a receptor that transmits outside-to-inside (reverse) signals back to the cells after binding to its native receptors. Anti-TNF agents infliximab, adalimumab and etanercept bind to and neutralize soluble TNF-alpha, but exert different effects on transmembrane TNF-alpha-expressing cells (TNF-alpha-producing cells). In the clinical settings, these three anti-TNF agents are equally effective for RA, but etanercept is not effective for granulomatous diseases. Moreover, infliximab induces granulomatous infections more frequently than etanercept. Considering the important role of transmembrane TNF-alpha in granulomatous inflammation, reviewing the biology of transmembrane TNF-alpha and its interaction with anti-TNF agents will contribute to understanding the bases of differential clinical efficacy of these promising treatment modalities.