Recently, miniaturization of a novel confocal laser endomicroscope (Optiscan Pty, Notting Hill, Victoria, Australia) has permitted functional integration into the distal tip of a conventional video colonoscope (Pentax EC3870K; Pentax, Tokyo, Japan) enabling imaging of the surface epithelium and the underlying lamina propria during ongoing video endoscopy. Using endomicroscopy and intravenous sodium fluorescein as a contrast agent, 'virtual histology' can be created, which allows visualization of both the surface epithelium, and some of the lamina propria (down to a quarter of a millimetre), including the microvasculature. Confocal endomicroscopy may have major implications in the future of colonoscopy as uniquely it allows in vivo diagnosis of colonic intraepithelial neoplasia and carcinoma enabling 'smart' biopsy targeting and hence potentially influencing 'on table' management decisions. Initial pilot data have now shown that confocal imaging in vivo using the newly developed EC3870K has high overall accuracy for the immediate diagnosis of intraepithelial neoplasia and carcinoma in sporadic screened cohorts, but also has a role in the detection of intraepithelial neoplasia detection in chronic ulcerative colitis cancer screening when used in conjunction with methylene blue chromoscopy. We discuss the current evidence in support of confocal endomicroscopy in the colorectum and explore the new diagnostic possibilities for this technology.