Abstract Background The medicinal properties of Inula cappa , a perennial shrub, are ascribed to its roots. In this article, we study the anti-inflammatory and immunomodulatory activities of I. cappa root extracts based on its utilization in traditional medicine-treatment of rheumatoid arthritis, menoxenia, fever, jaundice and many others. Methods Anti-inflammatory and immunomodulatory activities of I. cappa extracts were studied. The anti-inflammatory activity was determined by carrageenan-induced rat paw edema and cotton pellet-induced granulation method while the immunomodulatory activity was estimated by phagocytic assay method, hemagglutinating antibody (HA) titer assay, delayed-type hypersensitivity assay method, plaque forming cell assay and determination of immunoprophylatic activity. Results The methanolic extract showed maximum reduction in the rat paw edema and showed significant inhibition of the cotton pellet-induced granulomas in rats. The methanolic extract also showed potential immunomodulatory activity in all the assays performed. Two sesquiterpenes, isoalantolactone and germacranolide were also isolated from the methanolic extract. Conclusions The present study supports the evidence that the roots of I. cappa can be used as a potent anti-inflammatory and immunomodulatory agent.