The major aim of current pharmacokinetic studies is to investigate the drug absorption, disposition, metabolism and excretion in animals and humans. The time courses of plasma concentrations are usually characterized and linked to the pharmacodynamic effect to evaluate drug efficacy. However, under certain circumstance, site of action is located in tissues rather than in circulation, which requires direct measurement of tissue concentrations instead of plasma concentrations. Microdialysis is one of those techniques that have been demonstrated to be feasible for measurement of free drug concentration in many tissues, and is capable of being applied in most pharmacokinetic studies to enhance drug efficacy and reduce the unnecessary side effects. This paper reviews this technique from the perspective of theoretical background including the history of development, basic principle, components and their functions. Moreover, the relative recovery of microdialysis and the key factors are discussed, followed by calibration methods available to reduce the systemic bias. In addition, microdialysis is compared with conventional tissue sampling technique for superiorities and limitations. At last, the application of microdialysis in pharmacokinetic study is summarized, especially in assessment of drug efficacy and safety in different tissues. So far, microdialysis is a valuable tool in drug development and will play an unique role in a variety of pharmacokinetic and pharmacodynamic studies in future.