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The use of pharmacokinetic-pharmacodynamic (PK-PD) modeling in translational drug research is a promising approach that provides better understanding of drug efficacy and safety. It is applied to predict efficacy and safety in humans using in vitro bioassay and/or in vivo animal data. Current research in PK-PD modeling focuses on the development of mechanism-based models with improved extrapolation and prediction properties. A key element in mechanism-based PK-PD modeling is the explicit distinction between parameters for describing (i) drug-specific properties and (ii) biological system-specific properties. Mechanism-based PK-PD models contain specific expressions for the characterization of processes on the causal path between drug exposure and drug response. The different terms represent: target-site distribution, target binding and activation and transduction. Ultimately, mechanism-based PK-PD models will also characterize the interaction of the drug effect with disease processes and disease progression. In this review, the principles of mechanism-based PK-PD modeling are described and illustrated by recent applications.