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Balloon-based drug delivery systems allow localized application of drugs to a vascular segment to reduce neointimal hyperplasia and restenosis. Drugs are coated onto balloons using excipients as drug carriers to facilitate adherence and release of drug during balloon inflation. Drug-coated balloon delivery system is characterized by a rapid drug transfer that achieves high drug concentration along the vessel wall surface, intended to correspond to the balloon dilation-induced vascular injury and healing processes. The balloon catheter system allows homogenous drug delivery to the vessel wall, such that the drug release per unit surface area is kept constant along balloons of different lengths. Optimization of the balloon coating matrix is essential for efficient drug transfer and tissue retention until the artery remodels to a normal set point. Challenges in the development of balloon-based drug delivery to the arterial wall include finding suitable excipients for drug formulation to enable drug release to a targeted lesion site effectively, maintain coating integrity during transit, prolong tissue retention and reduce particulate generation. This review highlights various factors involved in the successful design of balloon-based delivery systems, including drug release kinetics, matrix coating transfer, transmural drug partitioning, dissolution rate and release of unbound active drug.