DISEASE CHARACTERISTICS: Histologically proven Kaposi's sarcoma (KS) HIV-positive by ELISA and Western blot Disease progression within the past 2 months Evaluable disease by non-invasive methods Minimum of 5 measurable lesions previously untreated with local therapy (such as intralesional injections) Ineligible if reduced performance status beyond minimally symptomatic pulmonary disease or other potentially or acutely life-threatening KS present Visceral disease, including pulmonary disease, allowed if the following conditions are met: Not acutely life-threatening No effect on performance status beyond minimal symptoms No urgent requirement for chemotherapy May be ineligible if actively bleeding or critically located KS lesions present that pose an immediate risk

PATIENT CHARACTERISTICS: Age: 18 and over Performance status: Karnofsky 70-100% Life expectancy: More than 3 months Hematopoietic: Absolute neutrophil count at least 750/mm3 Platelet count at least 70,000/mm3 Hemoglobin at least 8 g/dL (at least 1 month since prior transfusion) Hepatic: Bilirubin no greater than 2.0 mg/dL (no greater than 3.8 mg/dL if elevation due to a protease inhibitor or Gilbert's syndrome) AST and ALT no greater than 125 U/L PT or APTT no greater than 120% of control No history of hepatic cirrhosis Renal: Creatinine no greater than 1.5 mg/dL Creatinine clearance at least 70 mL/min Pulmonary: See Disease Characteristics Other: Not pregnant Negative pregnancy test Fertile patients must use effective hormonal and barrier contraception for at least 1 week before, during, and for at least 1 month after study No greater than grade 1 peripheral neuropathy of any etiology except a localized neuropathy due to a mechanical cause or trauma No other malignancy within the past year except completely resected basal cell skin cancer No grade 3 toxicity except lymphopenia or neutropenia No hypersensitivity to thalidomide or related compounds No evidence of underlying severe or life-threatening bacterial, viral, fungal, or protozoal infection within the past 2 weeks Fever of 39 degrees Celsius or greater within the past 10 days allowed only if not due to a severe underlying infection

PRIOR CONCURRENT THERAPY: Biologic therapy: No prior interferon No prior thalidomide for KS At least 6 months since prior suramin Chemotherapy: At least 4 weeks since prior chemotherapy Endocrine therapy: No prior systemic steroids except physiologic replacement doses of corticosteroids, sex hormones, or noncorticosteroids such as anabolic steroids for wasting syndrome Concurrent short-term courses of steroids allowed Radiotherapy: No prior radiotherapy Surgery: Not specified Other: At least 2 weeks since prior antiretroviral therapy OR On stable doses of 1 or more of the following for at least 2 weeks before study: Zidovudine, zalcitabine, didanosine, lamivudine, or stavudine Protease inhibitor Non-nucleoside reverse transcriptase inhibitor No other prior systemic anti-KS agent or regimen No other concurrent anti-KS therapy during the first 6 months of the study No concurrent sedating drugs that cannot be reduced to below a minimal level, sedating recreational drugs, or alcohol No change, initiation, or discontinuation of antiretroviral therapy unless medically indicated Concurrent intralesional therapy after 6 months on study on rare occasions for occasional painful or disfiguring lesions allowed