Cholestasis, or impaired bile flow, occurs in a wide variety of liver diseases and causes hepatic damage by retention and accumulation of toxic hydrophobic bile salts inducing persistent inflammation and oxidative stress. In the present research, we studied the effect of leflunomide, a novel immunosuppressive and anti-inflammatory agent against autoimmune disease, on hepatic damage produced by double ligature of the extrahepatic biliary duct in Wistar Albino rats. Cholestasis was done by double ligature and section of the extrahepatic biliary duct (BDL). Leflunomide was given i.g. 10 mg/kg/day. The severity of cholestasis and hepatic injury was determined by changes in the plasma enzyme activities of alanine aminotransferase (ALT), aspartate aminotransferase (AST) and levels of direct bilirubin. Malondialdehyde (MDA), protein carbonyl (PC), nitric oxide (NO), catalase (CAT) and superoxide dismutase (SOD) were determined to the oxidative status in the liver tissue. Myeloperoxidase (MPO) activity and levels of tissue hydroxyproline (HPR) were determined to neutrophil activation and collagen accumulation, respectively. Further, histological changes were studied. Treatment with leflunomide markedly reduced serum transaminase activities as compared to BDL rats. At the same time leflunomide significantly inhibited increases in liver MDA, PC and NO levels and also attenuated the depletion of CAT and SOD in the liver after bile duct ligation. Similarly, increase in tissue MPO activity and HPR due to BDL was also attenuated by leflunomide treatment. These findings were supported by histopathological findings. These findings suggested that leflunomide can attenuate hepatic damage in extrahepatic cholestasis by prevention of oxidative stress and inflammatory process.