The increasing demand for higher data rates, better quality of service, fully mobile and connected wireless networks lead the researchers to seek new solutions beyond 4G wireless systems. It is anticipated that 5G wireless networks, which are expected to be introduced around 2020, will achieve ten times higher spectral and energy efficiency than current 4G wireless networks and will support data rates up to 10 Gbps for low mobility users. The ambitious goals set for 5G wireless networks require dramatic changes in the design of different layers for next generation communications systems. Massive multiple-input multiple-output (MIMO) systems, filter bank multicarrier (FBMC) modulation, relaying technologies, and millimeter-wave communications have been considered as some of the strong candidates for the physical layer design of 5G networks. In this article, we shed light on the potential and implementation of index modulation (IM) techniques for MIMO and multi-carrier communications systems which are expected to be two of the key technologies for 5G systems. Specifically, we focus on two promising applications of IM: spatial modulation (SM) and orthogonal frequency division multiplexing with IM (OFDM-IM), and we discuss the recent advances and future research directions in IM technologies towards spectral and energy-efficient 5G wireless networks.I. INTRODUCTION After more than 20 years of research and development, the achievable data rates of today's cellular wireless communications systems are several thousands of times faster compared to earlier 2G wireless systems. However, unprecedented levels of spectral and energy efficiency are expected from 5G wireless networks to achieve ubiquitous communications between anybody, anything, and anytime [1]. In order to reach the challenging objectives of 5G wireless networks, the researchers have envisioned novel physical layer (PHY) concepts such as massive multiple-input multiple-output (MIMO) systems and non-orthogonal multi-carrier communications schemes. However, the wireless community is still working day and night to come up with new and more effective PHY solutions towards 5G networks. There has been a growing interest on index modulation (IM) techniques over the past few years. IM, in which the indices of the building blocks of the considered communications systems are used to convey additional information bits, is a novel digital modulation scheme with high spectral and energy efficiency. Spatial modulation (SM) and orthogonal frequency division multiplexing with IM (OFDM-IM) schemes, where the corresponding index modulated building blocks respectively are the transmit antennas of a MIMO system and the subcarriers of an OFDM system, appear as two interesting as well as promising applications of the IM concept.After the pioneering works of Mesleh et al.[2] and Jeganathan et al.[3], SM techniques have attracted significant attention over the past few years. Although having strong and well-established competitors such as vertical Bell Labs layered space-ti...