The numbers of both large- and small-molecule drug candidates have increased substantially over the past decade, while overall and late-stage failure rates have hovered around 80 and 50% respectively. The corresponding rise in research and development expenditures relative to numbers of approved drugs has made it increasingly apparent that new methods are needed to assess potential efficacy in the earliest stages of drug development. It is generally not possible to power early-phase trials sufficiently to demonstrate efficacy using clinical end points. However, functional imaging techniques can often provide both the sensitivity to treatment effects and high reproducibility necessary to obtain statistically supportable evidence of treatment effect, even in relatively small Phase I trials. This article examines both the benefits and potential pitfalls associated with the inclusion of functional and molecular imaging in the drug development process.