Mechanism-based PK-PD models differ from conventional PK-PD models in that they contain specific expressions to characterize, in a quantitative manner, processes on the causal path between drug administration and effect. This includes target site distribution, target binding and activation, pharmacodynamic interactions, transduction, and homeostatic feedback mechanisms. As the final step, the effects on disease processes and disease progression are considered. Particularly through the incorporation of concepts from receptor theory and dynamical systems analysis, important progress has been made in the field of mechanism-based PK-PD modeling. This has yielded models with much-improved properties for extrapolation and prediction. These models constitute a theoretical basis for rational drug discovery and development.