The pathophysiology of thyroid eye disease (TED) is complex and incompletely understood. Orbital fibroblasts (OFs) seem to be the key effector cells that are responsible for the characteristic soft tissue enlargement seen in TED. They express potentially pathogenic autoantigens, such as thyrotropin receptor and insulin-like growth factor-1 receptor. An intricate interplay between these autoantigens and the autoantibodies found in Graves disease may lead to the activation of OFs, which then leads to increased hyaluronan production, proinflammatory cytokine synthesis, and enhanced differentiation into either myofibroblasts or adipocytes. Some of the OFs in TED patients seem to be derived from infiltrating fibrocytes. These cells originate from the bone marrow and exhibit both fibroblast and myeloid phenotype. In the TED orbit, they may mediate the orbital expansion and inflammatory infiltration. Last, lymphocytes and cytokines are intimately involved in the initiation, amplification, and maintenance of the autoimmune process in TED.