Approximately 25-50 million Americans, 30 million Europeans, and 8% of the Australian population have a rare disease. Rare diseases are thus a common problem for clinicians and account for enormous healthcare costs worldwide due to the difficulty of establishing a specific diagnosis. In this article, we review the milestones achieved in our understanding of rare diseases since the emergence of next-generation sequencing (NGS) technologies and analyze how these advances have influenced research and diagnosis. The first half of this review describes how NGS has changed diagnostic workflows and provided an unprecedented, simple way of discovering novel disease-associated genes. We focus particularly on metabolic and neurodevelopmental disorders. NGS has enabled cheap and rapid genetic diagnosis, highlighted the relevance of mosaic and de novo mutations, brought to light the wide phenotypic spectrum of most genes, detected digenic inheritance or the presence of more than one rare disease in the same patient, and paved the way for promising new therapies. In the second part of the review, we look at the limitations and challenges of NGS, including determination of variant causality, the loss of variants in coding and non-coding regions, and the detection of somatic mosaicism variants and epigenetic mutations, and discuss how these can be overcome in the near future.