Formation damage is an essential part of drilling and production evaluation, which has a significant effect on well productivity and economics. Drilling fluids are significant sources of formation damage by different mechanisms. This article reviews the research works published during the past 30 years on formation damage associated with drilling fluids, including mechanical damage, chemical damage, and interaction with reservoir rock and fluids. Different filtration techniques, fines migration, and invasion models are discussed based on past studies and recent advancements. Laboratory experiments, methodology, and various aspects of evaluation are considered for further study. Despite presenting different authors’ views and experiences in this area, there is no integrated approach to evaluate formation damage caused by drilling fluids. Finally, the authors analyze the knowledge gap and conclude that a methodology must be designed to improve drilling fluids to prevent formation damage. Recent advances in the area of nanotechnology show promising alternatives for new methods to prevent formation damage.