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Direct current stimulation is a neuromodulatory noninvasive brain stimulation tool, which was first introduced in animal and human experiments in the 1950s, and added to the standard arsenal of methods to alter brain physiology as well as psychological, motor, and behavioral processes and clinical symptoms in neurological and psychiatric diseases about 20 years ago. In contrast to other noninvasive brain stimulation tools, such as transcranial magnetic stimulation, it does not directly induce cerebral activity, but rather alters spontaneous brain activity and excitability by subthreshold modulation of neuronal membranes. Beyond acute effects on brain functions, specific protocols are suited to induce long-lasting alterations of cortical excitability and activity, which share features with long-term potentiation and depression. These neuroplastic processes are important foundations for various cognitive functions such as learning and memory formation and are pathologically altered in numerous neurological and psychiatric diseases. This explains the increasing interest to investigate transcranial direct current stimulation (tDCS) as a therapeutic tool. However, for tDCS to be used effectively, it is crucial to be informed about physiological mechanisms of action. These have been increasingly elucidated during the last years. This review gives an overview of the current knowledge available regarding physiological mechanisms of tDCS, spanning from acute regional effects, over neuroplastic effects to its impact on cerebral networks. Although knowledge about the physiological effects of tDCS is still not complete, this might help to guide applications on a scientifically sound foundation.