The plastid genome engineering system allows site-specific modifications via two homologous recombination events. It is much safer, more precise and efficient compared with the nuclear transformation system. This technology can be applied to the basic research to expand plastid genome function analysis, and it also provides an excellent platform for not only high-level production of recombinant proteins but also plant breeding. In this review, we summarize the state of the art and progresses in this field. We focus on novel breeding strategies in transformation system improvement and new tools to enhance plastid transgene expression levels. In addition, we highlight selected applications in resistance engineering and quality improvement via metabolic engineering. We believe that by overcoming current technological limitations in the plastid transformation system can another green revolution for crop breeding beckon.