In vitro dissolution and permeability testing aid the simulation of the in vivo behavior of inhalation drug products. Although the regulatory bodies have specific guidelines for the dissolution of orally administered dosage forms (e.g., tablets and capsules), this is not the case for orally inhaled formulations, as there is no commonly accepted test for assessing their dissolution pattern. Up until a few years ago, there was no consensus that assessing the dissolution of orally inhaled drugs is a key factor in the assessment of orally inhaled products. With the advancement of research in the field of dissolution methods for orally inhaled products and a focus on systemic delivery of new, poorly water-soluble drugs at higher therapeutic doses, an evaluation of dissolution kinetics is proving crucial. Dissolution and permeability testing can determine the differences between the developed formulations and the innovator’s formulations and serve as a useful tool in correlating in vitro and in vivo studies. The current review highlights recent advances in the dissolution and permeability testing of inhalation products and their limitations, including recent cell-based technology. Although a few new dissolution and permeability testing methods have been established that have varying degrees of complexity, none have emerged as the standard method of choice. The review discusses the challenges of establishing methods that can closely simulate the in vivo absorption of drugs. It provides practical insights into method development for various dissolution testing scenarios and challenges with dose collection and particle deposition from inhalation devices for dissolution tests. Furthermore, dissolution kinetic models and statistical tests to compare the dissolution profiles of test and reference products are discussed.