The Associated Press reports the drug will be used to treat newly diagnosed multiple myeloma, a condition that affects cells in the bone marrow used to fight infection.
Thalidomide will be used along with dexamethasone, a chemotherapy drug.
The controversial drug has not produced consistent results. A March study found it did not extend patient's lives.
A second study concluded that thalidomide did lengthen the lives of older patients, but caused serious adverse reactions.
The FDA approved thalidomide to treat leprosy in 1998. It had been widely prescribed in "off-label" use to treat multiple myeloma.
The agency mandates the drug carry strong warnings about the risk of birth defects. The new labels must also alert patients about the risk of blood clots in the lungs and legs when taking thalidomide with dexamethasone.
