In vitro permeability assays remain a valuable tool of screening scientists for lead compound optimization. As a majority of discovery projects are focused on the development of orally bioavailable drugs, the need for predictability and correlation of in vitro permeability data to in vivo absorption results has never been greater. For more than a decade, the Caco-2 screening assay has remained a popular, in vitro system to test compounds for intestinal permeability and efflux liability. Despite advances in artificial membrane technology and in silico modeling systems, drug compounds still benefit from testing in cell-based epithelial monolayer assays for lead optimization and SAR. This review discusses the strengths and limitations of the Caco-2 permeability assay, and puts into context the power of combining multiple assays and approaches to improve predictability and rank-ordering for lead compound optimization. Technical information for dealing with some of the most pressing issues with in vitro permeability assays (i.e. low aqueous solubility and low post-assay recovery) is also discussed. Insights are offered to help researchers avoid common pitfalls in the interpretation of in vitro permeability data, which can often lead to the perception of misleading results for correlation to in vivo data. In addition, the advantages of addressing the issue of efflux liability early in the drug development process is discussed, detailing the usefulness of Caco-2 cells for this type of screening paradigm.