OFFER OF EMPLOYMENT

Exhibit 10.1

Adolor Corporation

700 Pennsylvania Drive

Exton, Pennsylvania 19341

August 1, 2005

Mr. David Madden

Dear: Mr. Madden,

Adolor Corporation, a Delaware corporation (the “Company”), is pleased to offer you a position as the interim President and Chief Executive Officer of the Company, commencing on August 8, 2005 (your “Start Date”) for a period of up to one year, to serve at the pleasure of the Company’s Board of Directors (the “Board”). This offer and your employment with the Company are subject to the terms and conditions of this offer letter (the “Offer Letter”).

Positions and Responsibilities

In respect of the positions set forth above, commencing on your Start Date, you will have the duties, responsibilities and authority normally associated with the offices and positions of president and chief executive officer of a corporation, including, without limitation, complete operational and management authority with respect to, and complete responsibility for, the overall operations and day-to-day business and affairs of the Company. You will be expected to assist the Board in the recruitment of a successor president and chief executive officer.

Duties

During your employment as an at-will employee of the Company, you will devote substantially all of your business time to the business and affairs of the Company and you will use your reasonable best efforts to perform faithfully and efficiently the duties and responsibilities contemplated by the Offer Letter, provided, however, that there will be no restriction on your ability to (a) manage your personal, financial, and legal affairs, and (b) serve on civic or charitable boards or committees and other boards of entities that do not compete with the Company upon prior notice to the Board. It is understood that you will be not be relocating your primary residence and that you will generally work from home at least two days per week.

Compensation and Stock Option Grant

If you decide to take this position, you agree to serve without a salary and the Board will grant to you on the Start Date options to purchase 300,000 shares of the Company’s Common Stock at an exercise price based on the closing price of the Company’s Common Stock on the date immediately preceding your Start Date (the

“Options”). The Options shall vest on the first anniversary of their grant date; provided however that the acceleration of vesting of the options shall occur on the earlier of the following dates: (i) the date that a successor president and chief executive officer is named by the Board; (ii) the date that your employment as President and Chief Executive Officer of the Company is terminated by the Board of Directors without Cause (as defined below); or (iii) the date that you resign as President and Chief Executive Officer of the Company with Good Reason. In the event of your inability to serve as President and Chief Executive Officer of the Company as a result of your death or Disability, the Options shall vest ratably up to the date of such termination. To the extent permitted, the Options will be Incentive Stock Options and will be issued under the Adolor Corporation 2003 Stock-Based Incentive Compensation Plan (the “2003 Plan”) and any amount not permitted to be issued under the 2003 Plan will be issued under the Company’s Amended and Restated 1994 Equity Compensation Plan (the “1994 Plan”). It is the intention of the parties that termination of your service as interim President and Chief Executive Officer provided that you continue as a Director of the Company shall not be a termination of service under either the 1994 Plan or the 2003 Plan. The Options shall have a ten-year term from the date of grant, subject to earlier termination pursuant to the terms of the stock option plan under which the Options have been granted.

Benefits

You will be entitled to participate in all benefit programs maintained by the Company (including annual vacation of at least four weeks and medical, dental, life insurance and disability plans) that may be provided to the Company’s senior executives from time to time.

Termination of Employment

In the event your employment is terminated (i) by you voluntarily without Good Reason or (ii) by the Company for Cause, you will only be entitled to receive from the Company (a) immediate payment of any unpaid expense reimbursements, deferred compensation and unused accrued vacation days through the date of termination, and (b) any other payments and/or benefits which you are entitled to receive under the terms and provisions of any employee pension, incentive or welfare benefit plans of the Company.

For purposes of the Offer Letter, “Cause” means (a) your conviction (including a plea of guilty or nolo contendere) of a felony under federal law or the law of the state in which such action occurred,