The success of current treatment strategies is limited by the development of therapy resistance as evidenced by recurrence of the primary tumor or distant metastasis. Eradication of primary and metastatic disease requires interventions at both the cancer cell and tumor microenvironment levels. In this review, we will discuss mechanisms that are intrinsic to cancer cells, and those that are mediated by the tumor microenvironment as contributors to drug resistance. Mechanisms contributing to multidrug resistance phenotype and the challenges facing molecular targeted therapy are discussed. The DNA damage tolerance pathway confers tolerance to a variety of structurally and functionally unrelated drugs. A rationale for targeting the DNA damage tolerance pathway as a novel tool for overcoming drug resistance is discussed. We have also addressed the need for employing clinically relevant model systems for performing drug sensitivity evaluations. These model systems must take into account the three-dimensional organization and in vivo relationship of tumor with its microenvironment. Such integrative efforts would not only yield a more global understanding of the tumor- and microenvironment-derived mechanisms involved in emergence of drug resistance but would also provide novel therapeutic targets that will disrupt the interactions between the tumor cells and its microenvironment.