Cyclodextrins (CDs) have been widely investigated as a unique pharmaceutical excipient for past few decades and is still explored for new applications. They are highly versatile oligosaccharides which possess multifunctional characteristics, and are mainly used to improve the physicochemical stability, solubility, dissolution rate, and bioavailability of drugs. Stability constant, factors affecting complexation, techniques to enhance complexation efficiency, the preparation methods for molecular inclusion complexes and release of guest molecules are discussed in brief. In addition, different CD derivatives and their pharmacokinetics are elaborated. Further, the significance of CD complex in aqueous solubility, dissolution and bioavailability, stability, and taste masking is explained. The recent advancement of CDs in developing various drug delivery systems is enlightened. Indeed, the potential of CDs by means of inclusion complex formation have widen the applicability of these materials in various drug delivery systems including ocular, osmotic, mucoadhesive, transdermal, nasal, and targeted delivery systems. Feasibility studies have been performed on the benefit of these cyclic oligomers as nanocarriers, a strategy that can modify the drugs with improved physicochemical properties. Studies also demonstrated the feasibility of CDs to self-assemble in the form of stable nanoaggregates, which may extend the scope of CDs in drug delivery to the continually expanding list of new drug entities.