The pharmaceutical industries face a series of challenges in the delivery of many newly developed drug molecules because of their low solubility, bioavailability, stability and polymorphic conversion. These limitations are further exacerbated when drug molecules are insoluble or sparingly soluble in water and most pharmaceutically accepted organic solvents. To address these limitations, innovation is required in the pharmaceutical sciences for the formulation of drugs, solvents or systems for effective drug delivery. Fortunately, in the past few years, ionic liquids (ILs) - a novel class of environmentally benign and tailor-made solvents - have been increasingly exploited as solvents, co-solvents and/or materials in the fields of pharmaceutical drug delivery and active pharmaceutical ingredient (API) formulation because of their unique and tunable physicochemical and biological properties. The use of ILs can markedly improve the pharmacokinetic and pharmacodynamic properties of drugs. To highlight the potential of ILs as a drug delivery/formulation tool, this review gives an overview of the application of ILs to address critical pharmaceutical challenges, including the low solubility, polymorphism and bioavailability of drugs. This review is not intended to be comprehensive, but rather to present the efforts made in using ILs in drug solubility, API formulation and drug delivery, including topical, transdermal and oral delivery, with particular emphasis on recent developments. © 2016 The Royal Society of Chemistry.