Enzymes are increasingly being used as biocatalysts in the generation of products that have until now been derived using traditional chemical processes. Such products range from pharmaceutical and agrochemical building blocks to fine and bulk chemicals and, more recently, components of biofuels. For a biocatalyst to be effective in an industrial process, it must be subjected to improvement and optimization, and in this respect the directed evolution of enzymes has emerged as a powerful enabling technology. Directed evolution involves repeated rounds of (i) random gene library generation, (ii) expression of genes in a suitable host and (iii) screening of libraries of variant enzymes for the property of interest. Both in vitro screening-based methods and in vivo selection-based methods have been applied to the evolution of enzyme function and properties. Significant developments have occurred recently, particularly with respect to library design, screening methodology, applications in synthetic transformations and strategies for the generation of new enzyme function.