Due to their non-centrosymmetric crystal orientation, wurtzite III-nitride crystals have two distinct orientations, i.e. III-polar and N-polar along the c-axis. Extensive effort has been devoted to polarity control and the characterization of III-nitride thin films. Both III-polar and N-polar films possess some unique features. By taking full advantage of both III and N-polar domains in a single structure, a lateral polarity structure (LPS), where III-polar and N-polar domains are grown side-by-side simultaneously on the wafer, has attracted great interest. In this review, recent progress in the design and fabrication of III-nitride LPS on various substrates is summarized. The structural, optical and electronic properties of III-nitride thin films incorporating LPS are discussed, with special attention paid to the interface between adjacent domains. Various techniques to qualitatively and quantitatively identify the polarity domains are provided, and their applications in optoelectronic and electronic devices including light-emitting-diodes, nonlinear frequency doubling waveguides, Schottky-barrier-diodes, etc, are intensively elaborated on. Finally, challenges related to the development of LPS-based devices and future perspectives are presented.