Basic concept of a smart grid is to have monitoring capability with data integration, advanced analysis to support system control, enhanced power security and effective communication to meet the power demand and reduce the energy consumption and cost. Implementing the smart grid will require intelligent interaction between the power generating and consuming devices that can be achieved by installing devices capable of processing data and communicating it to various parts in the grid. In short, we can say that the modern efficient data processing and communication technologies require advance digital signal processing techniques used in smart grid. This chapter first provides a comprehensive survey on the applications of signal processing techniques in smart grid. The challenges and limitations of signal processing techniques regarding the smart grid are also presented. Literature review of the recent advances in smart grid is also presented. This chapter also outlines some future research directions related to the field of applications of signal processing techniques in smart grid.