Because of their bioadaptability and multi-functional characteristics, cyclodextrins (CDs) are capable of alleviating the undesirable properties of drug molecules in various routes of administration through the formation of inclusion complexes. This article outlines the current application of natural and chemically modified CDs in the design of advanced dosage forms. In an oral drug delivery system (DDS), the hydrophilic and ionizable CDs can serve as potent drug carriers in the immediate release- and delayed release-formulations, respectively, while the release rate of water-soluble drugs can be retarded by hydrophobic CDs. Since CDs are able to extend the function of pharmaceutical additives, the combination of molecular encapsulation with other carrier materials will become effective and a valuable tool in the improvement of drug formulation. Moreover, the most desirable attribute for the drug carrier is its ability to deliver a drug to a targeted site; conjugates of a drug with CDs can be a versatile means of constructing a new class of colon-targeting prodrugs. On the basis of this knowledge, the advantages and limitations of CDs in DDS are addressed.