Scientific innovation has promoted the rapid discovery and development of cancer-related biomarkers. This has fostered improved mechanistic understandings of disease biology, facilitated the development of novel targeted therapies and offers the potential to better define the natural history of a disease and to predict response to specific treatment. Clinical trials are evolving, from the use of exploratory 'correlative studies' that assist in the understanding of disease mechanisms, to the use of validated biomarkers that are integral to the design of definitive prospective studies. A rigorous process for biomarker development and validation, followed by evaluation in well-designed, prospective clinical trials that demonstrate improved patient outcomes is required for new biomarkers to change clinical practice. To date, the number of biomarkers considered clinically useful is disappointingly small because of conflicting conclusions generated from trials with practical and methodological limitations. This review will highlight several important aspects related to the design and analysis of clinical trials that incorporate a biomarker as a central component. First, we review biomarker development, how biomarkers may be used as targets and how biomarkers can influence methodology to optimize efficiency of drug development through the use of surrogate outcomes. Second, we focus on issues related to trials evaluating potential prognostic biomarkers and how the predictive properties of biomarkers may be used to determine which patients might optimally benefit from a specific intervention.