The skin is the major interface between the body and the environment. The cutaneous metabolic activity has been identified and widely studied in recent years. It is clear that active enzymes in viable skin tissues have a capacity for bio-transforming topically applied compounds, with a consequence of an altered pharmacological effect. Although the extent of cutaneous metabolism is modest compared to major metabolism in liver, it is important to consider the effect of inherent metabolic function on both local and systematic transdermal delivery. In this review, recent literatures concerning in vitro & in vivo models and techniques used in the study of skin metabolic processes were summarized. The potential influence from skin transporters, diseased conditions, and the chemicals used in skin absorption studies on cutaneous metabolic function, was then discussed. We also reviewed the prodrug design strategy and its applications in transdermal drug delivery.