Re: Interim Chief Executive Officer Agreement

Exhibit 10.1

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [*]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

Novacea, Inc.

December 18, 2006

Mr. John Walker

Dear John:

On behalf of Novacea, Inc. (the “ Company ”), I am pleased to offer you the position of Interim Chief Executive Officer of the Company on the terms and conditions set forth in this letter agreement (this “ Agreement ”). You have agreed to accept this role, which is a position in addition to your current role as Chairman of the Board of Directors of the Company (the “ Board ”), while we engage in a search for a permanent Chief Executive Officer. You may accept this Agreement by signing and returning a copy of this Agreement to the Company as provided below.

1. Term of Agreement. Your services under this Agreement shall commence on December 1, 2006 (“ Start Date ”), and continue until the earliest to occur of: (i) our appointment of a permanent Chief Executive Officer, or (ii) your resignation from this position or the termination of your service by us (each of the foregoing, the “ Separation Date ”). Following the Separation Date, to the extent you are then Chairman of the Board, or a member of the Board (if not Chairman of the Board), your duties will revert to solely those of Chairman of the Board or a member of the Board, as applicable, and you will continue to be compensated for your services only as Chairman of the Board or a member of the Board, as applicable. This Agreement is terminable at will by you or the Company at any time (for any reason or for no reason) in accordance with Section 7 of this Agreement. If this Agreement terminates for any reason, you shall not be entitled to any payments, benefits, damages, awards or other compensation other than as provided in this Agreement.

2. Position and Duties. During the term of this Agreement, you shall serve as Interim Chief Executive Officer of the Company, in addition to providing services as Chairman of the Board. Your duties and authority as Interim Chief Executive Officer shall be prescribed by the Board and shall be commensurate with those of a chief executive officer of a company of comparable size and with a similar business as the Company. You agree that during the term of this Agreement you shall commit approximately 50% of your regular business time for services to the Company.

3. Withholding. Your status with respect to the services you perform under this Agreement shall be as an employee of the Company. The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, or local withholding or other taxes, deductions or charges which the Company is required to withhold.

4. Chairman of the Board. You hereby acknowledge that the responsibilities contemplated under this Agreement are in addition to your responsibilities and duties as Chairman of the Board. You hereby acknowledge that re-election to the Board as Chairman and as a member of the Board shall be governed by the terms of the bylaws of the Company.

5. Compensation and Benefits. In consideration for your services to the Company, you shall receive the following compensation and benefits from the Company.

(a) Salary . Until the Separation Date, the Company shall pay you a salary at the annual rate of $250,000 (the “ Salary ”) in accordance with the Company’s regular payroll practices.

(b) Performance Bonus . You shall be entitled to earn an annual performance bonus based upon achievement of performance objectives to be established by the Compensation Committee of the Board with your consultation. The target bonus amount upon attainment of 100% of the performance objectives shall be equal to $125,000.

(c) Stock Options . As additional consideration for your services as Interim Chief Executive Officer, the Company shall grant you pursuant to the Company’s 2006 Incentive Award Plan (the “ Plan ”), subject to approval of the Compensation Committee of the Board, stock options to purchase 250,000 shares of the Company’s common stock (the “ Option ”), which stock options shall be incentive stock options to the maximum extent permitted by law. The Option shall be subject to the following terms and conditions, in addition to the terms and conditions set forth in the Plan and the agreement evidencing the Option:

(1) The Option shall vest and become exercisable over four years in equal, monthly installments, measured from the Start Date, subject to your continued service to the Company on each of the vesting dates, including your service as a member of the Board; provided , however , that the Option shall automatically vest and become immediately exercisability on an accelerated basis with respect to an aggregate of up to 150,000 shares subject to the Option as follows in the event that any of the following occur during the term of this Agreement: (i) with respect to 50,000 shares subject to the Option [*]; (ii) with respect to an additional 50,000 shares subject to the Option upon achievement of target enrollment of the ASCENT-2 Study trial and expansion of the clinical development programs for Ascentar and AQ4N; and (iii) with respect to an additional 50,000 shares subject to the Option upon the Company’s appointment of an individual for the Chief Executive Officer position of the Company in a full-time capacity. In the event that immediately prior to the occurrence of an event described in the immediately preceding sentence the Option is unvested with respect to less than 50,000 shares, it shall become fully vested in connection with such event. Upon the termination of your services under this Agreement, the Option shall cease to be subject to the foregoing accelerated vesting provisions (but as described above, will continue to vest based on your service as a member of the Board).

(2) The Options shall have a per share exercise price equal to the fair market value of a share of the Company’s common stock (as determined in accordance with the terms of the Plan) on the date of grant.