Drug disposition is governed by multiple mechanisms, of which metabolic clearance mediated by phase I and phase II drug-metabolizing enzymes plays a critical role in understanding drug-drug interactions. In recognition of the importance of drug metabolism, pharmaceutical companies employ various in vitro methods to characterize the contribution of drug-metabolizing enzymes to the overall clearance of a given molecular entity. Such studies are conducted with the expectation that �metabolic liability� can be minimized during the discovery stage and effective clinical trials can be designed and conducted during the development. Selected examples will be discussed to highlight the utility of cytochrome P450 (CYP) reaction phenotyping in lead selection and characterization, in conjunction with available in vivo data. Although the discussion focuses on the CYP family of enzymes, many of the concepts apply equally to other enzyme systems (e.g., non-microsomal and Phase II drug-metabolizing enzymes).