Microsatellite instability (MSI) is the molecular fingerprint of the deficient mismatch repair (MMR) system, which characterizes ∼15% of colorectal cancers. MSI develops as a result of germline mutations in MMR genes or, more commonly, from epigenetic silencing of MLH1 in sporadic tumors occurring in a background of methylation of CpG islands in gene promoter regions and in tumors that frequently show hotspot mutations in the BRAF oncogene. MSI tumors have distinct phenotypic features and have been consistently associated with a better stage-adjusted prognosis compared with microsatellite stable tumors. MSI negatively predicts response to 5-fluorouracil and may also determine responsiveness to other drugs used for treatment of colorectal cancers. Recent data have expanded the molecular heterogeneity of MSI tumors and may contribute to our understanding of differential chemosensitivity. The ability to identify deficient MMR has important implications for patient management, and it holds promise for therapeutic exploitation and for the development of novel therapeutics.