A novel synthesis of the human leukocyte common antigen-related (LAR) phosphatase inhibitor, illudalic acid, has been achieved by a route more amenable to structure modifications. A series of simpler analogues of illudalic acid was synthesized and evaluated for potency in inhibiting LAR. The structure-activity relationship (SAR) study has shown that the 5-formyl group and the hemi-acetal lactone are crucial for effective inhibition of LAR activity, and are the key pharmacophores of illudalic acid. The fused dimethylcyclopentene ring moiety evidently helps to enhance the potency of illudalic acid against LAR. A preliminary study of the mechanism of action of illudalic acid against LAR was conducted using electrospray ionization mass spectrometry (ESI-MS) and molecular docking techniques. The results are in full agreement with the described mechanism.