Photodynamic therapy is a treatment modality that is developing rapidly and increasing in utilization within various medical specialties, including dermatology. This technique requires the presence of a photosensitizer, light energy and molecular oxygen to selectively destroy pathologic cells. A thorough understanding of photobiology and tissue optics is necessary to correctly and effectively utilize photodynamic therapy in dermatology. Photodynamic therapy has been approved by the US Food and Drug Administration to treat actinic keratoses. In Europe, photodynamic therapy is currently being used in the treatment of actinic keratoses and basal cell carcinoma. Other off-label uses of photodynamic therapy have included cutaneous lesions of Bowen's disease, psoriasis, cutaneous T-cell lymphoma and acne. Most recently, photodynamic therapy has been employed in photorejuvenation. The advantages of photodynamic therapy include the capacity for noninvasive targeted therapy via topical application of the drug and local irradiation of involved areas, as well as the ability to generate excellent cosmetic results with minimal discomfort. This review summarizes the fundamentals of photodynamic therapy and its role in the treatment of cutaneous disorders, particularly skin malignancies.