Erlotinib (Tarceva) is a reversible and highly specific inhibitor of epidermal growth factor receptor (EGFR) tyrosine kinase. Phase I studies established a fixed daily oral dose of 150 mg as the recommended dose for Phase II studies. Using this dose and schedule, the response rate in a group of 57 patients with EGFR-positive non-small cell lung cancer after failure of platinum-containing chemotherapy was 12%. The median survival was 8.4 months, and the 1-year survival was 40%. Occurrence and severity of rash were correlated with an improved survival independently of performance status. Another ongoing Phase II study in 50 patients with bronchoalveolar carcinoma has shown a response rate of 26%. Results from two Phase III front-line studies in combination with chemotherapy, TALENT and TRIBUTE, have been recently reported. The addition of erlotinib did not improve response rate, time to progression, or survival. Efforts in the continued development of erlotinib should be focused on the following: (a) investigating the reasons for the lack of relationship between EGFR expression and clinical outcome; (b) the reasons for the failure of the front-line combination trials; and (c) confirming the rash/clinical outcome relationship. Progress in these tasks will allow a better selection of patients who can benefit from this therapy, permit the development of more effective combination schedules with cytotoxics, and define whether this agent should be used at the optimal biological dose or at the maximum-tolerated dose.