This review promotes the value of isolated hepatocytes in modern Drug Discovery programmes and outlines how increased understanding, particularly in the area of in vitro-in vivo extrapolation (IVIVE), has led to more widespread use. The importance of in vitro metabolic intrinsic clearance data for predicting in vivo clearance has been acknowledged for several years and the greater utility of hepatocytes, compared with hepatic microsomes and liver slices, for this application is discussed. The application of hepatocytes in predicting drug-drug interactions (DDIs) resulting from reversible and irreversible (time-dependent) inhibition is relatively novel but affords the potential to study both phase I and phase II processes together with any impact of drug efflux and/or uptake (cellular accumulation). Progress in this area is reviewed along with current opinions on the comparative use of primary hepatocytes and higher throughput reporter gene-based systems for studying cytochrome P450 (CYP) induction. The appreciation of the role of transporter proteins in drug disposition continues to evolve. The study of hepatic uptake using isolated hepatocytes and the interplay between drug transport and metabolism with respect to both clearance and DDIs and subsequent IVIVE is also considered.