The importance of reactive metabolites in the pathogenesis of drug-induced toxicity has been a focus of research interest since pioneering investigations in the 1950s revealed the link between toxic metabolites and chemical carcinogenesis. There is now a great deal of evidence that shows that reactive metabolites are formed from drugs known to cause hepatotoxicity, but how these toxic species initiate and propagate tissue damage is still poorly understood. This review summarizes the evidence for reactive metabolite formation from hepatotoxic drugs, such as acetaminophen, tamoxifen, diclofenac, and troglitazone, and the current hypotheses of how this leads to liver injury. Several hepatic proteins can be modified by reactive metabolites, but this in general equates poorly with the extent of toxicity. Much more important may be the identification of the critical proteins modified by these toxic species and how this alters their function. It is also important to note that the toxicity of reactive metabolites may be mediated by noncovalent binding mechanisms, which may also have profound effects on normal liver physiology. Technological developments in the wake of the genomic revolution now provide unprecedented power to characterize and quantify covalent modification of individual target proteins and their functional consequences; such information should dramatically improve our understanding of drug-induced hepatotoxic reactions.