Adverse drug reactions are a major clinical problem and often preclude drug administration. Drug hypersensitivity (or allergy) represents one of the most severe and unpredictable reactions associated with drug therapy. Our current understanding of drug hypersensitivity is based on the hapten hypothesis of immune recognition of drugs by T cells. The onset of hypersensitivity involves drug bioactivation, covalent binding, followed by uptake, antigen processing and T cell proliferation. There is convincing evidence that drugs associated with a high incidence of hypersensitivity are converted to protein reactive intermediates by the normal processes of drug metabolism and stimulate a cellular immune response in sensitive individuals. Until recently, however, there has been little evidence to relate the formation of a reactive metabolite to the initiation of a cellular immune response. The purpose of this review is to detail recent advances in our understanding of the complex mechanisms of drug hypersensitivity, and using severe skin reactions as an example, assess recent evidence that supports the hapten hypothesis of drug hypersensitivity.