Targeted therapeutic and imaging agents are becoming more prevalent, and are used to treat increasingly smaller segments of the patient population. This has lead to dramatic increases in the costs for clinical trials. Biomarkers have great potential to reduce the numbers of patients needed to test novel targeted agents by predicting or identifying non-response early-on and thus enriching the clinical trial population with patients more likely to respond. Biomarkers are characteristics that are objectively measured and evaluated as indicators of normal biological processes, pathogenic processes, or pharmacologic responses to a therapeutic intervention. Biomarkers can be used to predict response to specific therapies, predict response regardless of therapy, or to monitor response once a therapy has begun. In terms of drug development, predictive biomarkers have the greatest impact, as they can be used as inclusion criteria for patient segmentation. Prognostic markers are used routinely in clinical practice but do not provide direction for the use of targeted therapies. Imaging biomarkers have distinct advantages over those that require a biopsy sample in that they are “non-invasive” and can be monitored longitudinally at multiple time points in the same patient. This review will examine the role of functional and molecular imaging in predicting response to specific therapies; will explore the advantages and disadvantages of targeting intracellular or extracellular markers; and will discuss the attributes of useful targets and methods for target identification and validation.