Opioid receptors are widely expressed in the central and peripheral nervous system and in the non-neuronal tissues. Data from animal and human clinical studies support the involvement of peripheral opioid receptors in analgesia, especially in the presence of inflammation. Inflammation has been shown to increase the synthesis of opioid receptors in the dorsal root ganglion neurons and enhance transport and accumulation of opioid receptors in the peripheral terminals of sensory neurons. Under the influence of chemokines and adhesion molecules, opioid peptide-containing immune cells extravasate and accumulate in the injured tissues. Stress, chemokines, cytokines, and other releasing factors in inflamed tissues stimulate these granulocytes to release opioid peptides. Once secreted, opioid peptides bind to and activate peripheral opioid receptors on sensory nerve fibers and produce analgesia by decreasing the excitability of sensory nerves and/or inhibiting release of pro-inflammatory neuropeptides. Research has revealed that local application of exogenous opioid agonists produces a potent analgesic effect by activating peripheral opioid receptors in inflamed tissues. The analgesic activity occurs without activation of opioid receptors in the central nervous system (CNS), and therefore centrally mediated side effects, such as respiratory depression, mental clouding, altered consciousness, or addiction, are not associated with peripheral opioid activity. This discovery has stimulated research on developing peripherally restricted opioid agonists that lack CNS effects. In addition, it has been recognized that opioid receptors modulate inflammation, and that opioids have anti-inflammatory effects. The anti-inflammatory actions of opioids are not well known or understood. Conflicting reports on mu-opioids suggest both anti-inflammatory and pro-inflammatory effects. This article will present the basis for peripheral opioid analgesia and describe current research directed at developing novel treatments for pain with improved side effect profiles.