Despite widespread clinical use of antimalarial drugs such as hydroxychloroquine and chloroquine in the treatment of rheumatoid arthritis (RA), systemic lupus erythematosus (SLE) and other inflammatory rheumatic diseases, insights into the mechanism of action of these drugs are still emerging. Hydroxychloroquine and chloroquine are weak bases and have a characteristic ‘deep’ volume of distribution and a half-life of around 50 days. These drugs interfere with lysosomal activity and autophagy, interact with membrane stability and alter signalling pathways and transcriptional activity, which can result in inhibition of cytokine production and modulation of certain co-stimulatory molecules. These modes of action, together with the drug’s chemical properties, might explain the clinical efficacy and well-known adverse effects (such as retinopathy) of these drugs. The unknown dose–response relationships of these drugs and the lack of definitions of the minimum dose needed for clinical efficacy and what doses are toxic pose challenges to clinical practice. Further challenges include patient non-adherence and possible context-dependent variations in blood drug levels. Available mechanistic data give insights into the immunomodulatory potency of hydroxychloroquine and provide the rationale to search for more potent and/or selective inhibitors. Hydroxychloroquine and chloroquine are antimalarial drugs commonly used for the treatment of rheumatic diseases. Multiple mechanisms might explain the efficacy and adverse effects of these drugs, but further investigation could lead to the development of more specific and potent drugs.