The United States Medical Licensing Examination (USMLE) Step 1, arguably the most significant assessment in the USMLE examination series, changed from a 3-digit score to a pass/fail outcome in January 2022. Given the rapidly evolving body of literature on this subject, this paper aims to provide a comprehensive review of the historical context and impact of this change on various stakeholders involved in residency selection. For this, relevant keyword-based searches were performed in PubMed, Google Scholar, and Scopus to identify relevant literature. Given the unique history of USMLE Step 1 in the US residency selection process and the score’s correlation with future performance in board-certifying examinations in different specialties, this scoring change is predicted to significantly impact US Doctor of Medicine students, US Doctor of Osteopathic Medicine students, international medical graduates, and residency program directors, among others. The significance and the rationale of the pass/fail change along with the implications for both residency applicants and educators are also summarized in this paper. Although medical programs, academic institutions, and residency organizing bodies across the United States have swiftly stepped up to ensure a seamless transition and have attempted to ensure equity for all, the conversion process carries considerable uncertainty for residency applicants. For educators, the increasing number of applications conflicts with holistic application screening, leading to the expected greater use of objective measures, with USMLE Step 2 Clinical Knowledge likely becoming the preferred screening tool in lieu of Step 1.