Pharmacologically, misoprostol is a synthetic prostaglandin E₁ (PGE₁) analogue.

Misoprostol is approved for use in the prevention of NSAID induced gastric ulcers. It acts upon gastric parietal cells, inhibiting the secretion of gastric acid via G-protein coupled receptor mediated inhibition of adenylate cyclase, which leads to decreased intracellular cyclic AMP levels and decreased proton pump activity at the apical surface of the parietal cell. Because other classes of drugs, especially H2-receptor antagonists and proton pump inhibitors, are more effective for the treatment of acute peptic ulcers, Misoprostol is only indicated for use by people who are both taking NSAIDs and are at high risk for NSAID induced ulcers, including the elderly and people with ulcer complications. Misoprostol is sometimes coprescribed with NSAIDs to prevent their common adverse effect of gastric ulceration (e.g. with diclofenac in 'Arthrotec').

Misoprostol has other protective actions, but is only clinically effective at doses high enough to reduce gastric acid secretion. For instance, at lower doses, misoprostol may stimulate increased secretion of the protective mucus that lines the gastrointestinal tract and increase mucosal blood flow, thereby increasing mucosal integrity. However, these effects are not pronounced enough to warrant prescription of misoprostol at doses lower than those needed to achieve gastric acid suppression.

However, even in the treatment of NSAID induced ulcers, omeprazole proved to be at least as effective as misoprostol^{[citation needed]}, but significantly better tolerated, and therefore misoprostol should not be considered a first choice treatment. Misoprostol induced diarrhea and the need of multiple daily doses (typically four) are the main issues impairing compliance with therapy.