The isolation of specific binding molecules is a central problem in the drug discovery process and might be useful for the elucidation of the biological function of proteins identified in genome and proteome research. Libraries of organic molecules, conjugated covalently to DNA tags that serve as identification bar codes, have been proposed recently as a way to identify ligands of target proteins of choice efficiently. Here, we analyze the different strategies for constructing DNA-encoded chemical libraries, and the potential and challenges of this promising technology.