Direct compaction (DC) is the preferred method for tablet production. However, only a minority of the active pharmaceutical ingredients (APIs) can be truly manufactured into tablets by DC so far due to that most of APIs lack sufficient functional properties required for DC. Particle engineering with co-processing provides a promising way to obtain various composite API and/or excipient particles with markedly improved functional properties, which makes successful tableting of them by DC possible. This review, as an informative update and supplement, covers the improvement of functional properties of composite API and/or excipient particles via co-processing based on recent developments and researches in the area of particle engineering for DC. The improved functionality of co-processed particles and corresponding mechanisms were summarized and discussed from the perspective of structure characteristics (Crystal level and Particle level) as the properties of particles are markedly affected by their structure.