This chapter reviews theoretical understanding of ferromagnetic response that has been detected in diluted magnetic semiconductors (DMS). Particular attention is paid to those ferromagnetic DMS in which
no
precipitation of other crystallographic phases has been observed. It is argued that these materials can be divided into three categories. The first consists of (Ga,Mn)As, heavily doped p‐(Zn,Mn)Te, and related compounds. In these solid solutions, the theory built on p–d Zener's model of hole‐mediated ferromagnetism and on either the Kohn‐Luttinger
kp
theory or the multiorbital tight‐binding approach describes qualitatively, and often quantitatively, thermodynamic, micromagnetic, optical, and transport properties. Moreover, the understanding of these materials has provided a basis for the development of novel methods enabling magnetization manipulation and switching. To the second group, belong compounds in which a competition between long‐range ferromagnetic and short‐range antiferromagnetic interactions and/or the proximity of the localization boundary lead to an electronic nanoscale phase separation that results in characteristics similar to colossal magnetoresistance oxides. Finally, in a number of compounds a chemical nanoscale phase separation into the regions with small and large concentrations of the magnetic constituent is present. Methods of controlling the spinodal decomposition and possible functionalities of these systems are outlined.