Interleukin (IL)-38 is the least well-understood cytokine of the IL-1 family. Since its discovery twenty years ago, numerous studies have linked IL-38 to diverse pathologies, especially in the context of autoimmune and inflammatory processes, while its role in cancer has been less explored. Broad anti-inflammatory effects have been reported for IL-38 in both in vitro and in vivo models, and, together with its homology to the IL-1 and IL-36 receptor antagonists, have raised expectations about its potential therapeutic utility. Data in human and mouse experimental systems support a negative regulatory role of IL-38 on the Th17 axis through effects on T cells and myeloid cells. Additional studies point to tolerogenic functions of IL-38, acting on dendritic cells and regulatory T cells, as well as to inhibition of pro-inflammatory macrophage activity. IL-38 further exhibits anti-inflammatory and tissue protective properties in epithelial and mesenchymal cells. However, published data also reveal variability and inconsistent dose-dependencies of these anti-inflammatory effects, as well as context-dependent pro-inflammatory properties of IL-38, and are difficult to interpret due to the high heterogeneity in the materials and experimental designs used across studies. In addition, it is still not clear which receptor(s) is/are fundamental for IL-38 signalling, and the biological impact of N-terminal processing of the protein remains to be clarified. In this review, we provide an overview of our current knowledge of IL-38 biology, discuss persistent controversies surrounding this cytokine, and highlight some questions to be addressed to facilitate progress towards a better understanding of its mechanisms of action.