It is widely recognized that many active pharmaceutical ingredients (APIs) have a disagreeable taste that affects patient acceptability, particularly in children. Consequently, developing dosage forms with a masked taste has attracted a lot of interest. The application of cyclodextrins as pharmaceutical excipients is highly appreciated and well established, including their roles as drug delivery systems, solubilizers and absorption promoters, agents that improve drug stability, or even APIs. The first work describing the application of the taste-masking properties of CDs as pharmaceutical excipients was published in 2001. Since then, numerous studies have shown that these cyclic oligosaccharides can be effectively used for such purposes. Therefore, the aim of this review is to provide insight into studies in this area. To achieve this aim, a systematic evaluation was conducted, which resulted in the selection of 67 works representing both successful and unsuccessful works describing the application of CDs as taste-masking excipients. Particular attention has been given to the methods of evaluation of the taste-masking properties and the factors affecting the outcomes, such as the choice of the proper cyclodextrin or guest–host molar ratio. The conclusions of this review reveal that the application of CDs is not straightforward; nevertheless, this solution can be an effective, safe, and inexpensive method of taste masking for pharmaceutical purposes.