During the past several years, important advances have been made in our understanding of the mechanisms that regulate the expression of genes that determine drug clearance, including phase I and phase II drug-metabolising enzymes and drug transporters. Orphan nuclear receptors have been recognised as key mediators of drug-induced changes in both metabolism and efflux mechanisms. In this review, we summarise recent findings regarding the function of nuclear receptors in regulating drug-metabolising and transport systems, and the relevance of these receptors to clinical drug-drug interactions and the development of new drugs. Emphasis is given to two newly recognised 'orphan' receptors (the pregnane X receptor [PXR] and the constitutive androstane receptor [CAR]) and their regulation of cytochrome P450 enzymes, such as CYP3A4, CYP2Cs and CYP2B6; and transporters, such as P-glycoprotein (MDR1), multidrug resistance-associated proteins (MRPs) and organic anion transporter peptide 2 (OATP2). Although 'cross-talk' occurs between these two receptors and their target sequences, significant species differences exist between ligand-binding and activation profiles for both receptors, and PXR appears to be the predominant or 'master' regulator of hepatic drug disposition in humans. Several important physiological processes, such as cholesterol synthesis and bile acid metabolism, are also tightly controlled by certain ligand-activated orphan nuclear receptors (farnesoid X receptor [FXR] and liver X receptor [LXR]). In general, their ability to bind a broad range of ligands and regulate an extensive array of genes that are involved in drug clearance and disposition makes these orphan receptors attractive targets for drug development. Drugs have the capacity to alter nuclear receptor expression (modulators) and/or serve as ligands for the receptors (agonists or antagonists), and thus can have synergistic or antagonistic effects on the expression of drug-metabolising enzymes and transporters. Coadministration of drugs that are nuclear receptor agonists or antagonists can lead to severe toxicity, a loss of therapeutic efficacy or an imbalance in physiological substrates, providing a novel molecular mechanism for drug-drug interactions.