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Approximately 20 percent of right-sided colon cancers and 5 percent of left-sided colon and rectal cancers have a deficient DNA mismatch repair system. This results in the widespread accumulation of mutations to nucleotide repeats, some of which occur within the coding regions of cancer-related genes such as TGFβRII and BAX. A standardized definition for microsatellite instability (MSI) based on the presence of deletions to mononucleotide repeats is gaining widespread acceptance in both research and the clinic. Colorectal cancer (CRC) with MSI are characterized histologically by an abundance of tumor-infiltrating lymphocytes, poor differentiation and a signet ring or mucinous phenotype. In younger patients these tumors usually develop along the chromosomal instability pathway, in which case the mismatch repair genes are inactivated by germline mutation, somatic mutation and loss of heterozygosity. In older patients MSI CRC usually develops against a background of widespread hypermethylation that includes methylation-induced silencing of the mismatch repair gene MLH1. The overall biological and clinical phenotype of MSI CRC that arise in these two pathways is likely to be different and may account for some of the discordant results reported in the literature relating to the clinical properties of these tumors. The available evidence indicates that MSI is unlikely to be a clinically useful marker for the prognostic stratification of early-stage CRC. The predictive value of MSI for response to 5-fluorouracil-based chemotherapy remains controversial, while for other agents the predictive value is difficult to assess because they are used in combination regimens. The MSI phenotype is being actively investigated for novel therapeutic approaches based on the principle of synthetic lethality. Finally, the MSI status of CRC is an extremely useful marker for population-based screening programs that aim to identify individuals and families with the hereditary cancer condition known as Lynch syndrome.