This review discusses the cell-free layer at the wall of the microcirculatory vessels with emphasis on the influence of blood rheological parameters on its formation as well as its possible effects on microvascular functions. Understanding cell-free layer characteristics in the microcirculation has been of increased interest for its possible influence on physiological function. The availability of better imaging and measurement techniques in recent years has created an excellent opportunity for researchers to examine the cell-free layer in much greater detail than possible previously. The most recent approach enables capturing spatial and temporal information of cell-free layer characteristics which can provide new insights to how cell-free layer width and its variations can impact physiological function. Cell-free layer formation is dependent on diameter of the vessel, flow rate, and rheological properties of blood including hematocrit, red blood cell aggregation, and deformability. Specifically in microvessels, its formation can also be affected by the presence of the glycocalyx layer that lines the luminal surface of the vessel wall. As the cell-free layer is omnipresent in microcirculatory vessels, its formation at the vessel wall could affect function throughout the microvascular network by altering wall shear stress, local hematocrit, flow distribution, effective viscosity and nitric oxide production as well as its scavenging by red blood cells.