FK-778 is obtained by selective alkylation of leflunomide (I) at the methyl group with propargyl iodide (II) by means of butyl lithium in THF at ?8 C to give N-(4-trifluoromethylphenyl)-5-(3-butynyl)isoxazole-4-carboxamide (III), which is finally treated with water at 0 C.