The potential applications of next-generation sequencing technologies in diagnostic laboratories have become increasingly evident despite the various technical challenges that still need to be overcome to potentiate its widespread adoption in a clinical setting. Whole-genome sequencing is now both technically feasible and 'cost effective' using next-generation sequencing techniques. However, this approach is still considered to be 'expensive' for a diagnostic test. Although the goal of the US$1000 genome is fast approaching, neither the analytical hurdles nor the ethical issues involved are trivial. In addition, the cost of data analysis and storage has been much higher than initially expected. As a result, it is widely perceived that targeted sequencing and whole-exome sequencing are more likely to be adopted as diagnostic tools in the foreseeable future. However, the information-generating power of whole-exome sequencing has also sparked considerable debate in relation to its deployment in genetic diagnostics, particularly with reference to the revelation of incidental findings. In this review, we focus on the targeted sequencing approach and its potential as a genetic diagnostic tool.