Although often viewed as a single disease, colorectal cancer more accurately represents a constellation of heterogeneous subtypes that result from different combinations of genetic events and epigenetic alterations. Chromosomal instability (CIN), microsatellite instability (MSI) and CpG island methylator phenotype (CIMP) have been identified as the three major molecular characteristics, which interact with other significant mutations, such as mutations in the KRAS and BRAF genes. High-level MSI (MSI-H) is of eminent clinical importance. It is the seminal molecular feature for the identification of individuals with Lynch syndrome, but it may also occur in sporadic cancers with CIMP phenotype, which arise from serrated precursor lesions. MSI-H status is a marker of favorable prognosis and may be used for outcome prediction, that is, molecular grading. Among others, mucinous and medullary histology, signet-ring cell differentiation, and a marked anti-tumoral immune response are histological features suggesting MSI. Universal tumor testing is recommended and may be performed using immunohistochemistry (mismatch repair protein expression) or molecular analysis, as has recently been recommended by an international task force. In this review, we consider in detail the molecular pathogenesis of colorectal cancer, focusing on the diagnosis of MSI in both hereditary and sporadic tumors.