In order to properly diagnose and classify tumors and select the most appropriate therapies for patients, one must accurately and efficiently identify oncogenic mutations in key cancer-associated genes. Massively parallel DNA sequencing technology has the potential to dramatically enhance the field of molecular diagnostics. For increasingly lower costs, one can interrogate all clinically relevant genes for mutations, copy number alterations and structural rearrangements, with high detection sensitivity in heterogeneous tissue. Advances in exon capture, molecular barcoding and profiling of formalin-fixed paraffin-embedded specimens have further established the clinical potential of massively parallel sequencing. This article discusses promising strategies for DNA sequencing as a clinical tool and also the challenges in its implementation in the clinical arena.