Summary Background  In previous studies, etanercept significantly improved plaque psoriasis and was well tolerated. Objectives  To examine further the efficacy and safety of etanercept and to assess maintenance of treatment effect after dose reduction of etanercept. Methods  In this multicentre 24‐week study in the U.S.A., Canada and Western Europe, patients were at least 18 years old; had active, clinically stable plaque psoriasis involving at least 10% of body surface area; had a minimum Psoriasis Area and Severity Index (PASI) of 10 at screening; and had received or were a candidate to receive systemic psoriasis therapy or phototherapy. During the first 12 weeks of the study, patients were randomly assigned to receive by subcutaneous injection etanercept twice weekly (BIW) at a dose of 50 mg or 25 mg, or placebo BIW in a double‐blind fashion. During the second 12 weeks, all patients received etanercept 25 mg BIW. The primary endpoint was a 75% or greater improvement from baseline in PASI (PASI 75) at 12 weeks. Results  Five hundred and eighty‐three subjects were randomized and received at least one dose of study drug. At week 12, a PASI 75 was achieved by 49% of patients in the etanercept 50 mg BIW group, 34% in the 25 mg BIW group, and 3% in the placebo group (P < 0·0001 for each etanercept group compared with placebo). At week 24 (after 12 weeks of open‐label 25 mg etanercept BIW), a PASI 75 was achieved by 54% of patients whose dose was reduced from 50 mg BIW to 25 mg BIW, by 45% of patients in the continuous 25 mg BIW group, and by 28% in the group that received placebo followed by etanercept 25 mg BIW. Etanercept was well tolerated throughout the study. Conclusions  Etanercept provided clinically meaningful benefit to patients with chronic plaque psoriasis, with no apparent decrease in efficacy after dose reduction.