AbstractReceptor theory assigns mathematical rules to biological systems in order to quantify drug effects and define what biological systems can and cannot do, leading to the design of experiments that may further modify the model. Drug receptor theory also furnishes the tools for quantifying the activity of drugs in a system‐independent manner, essential because drugs are almost always studied in test systems somewhat removed from the therapeutic system for which they are intended. Since biological systems operate at different set points in the body under different conditions, the ability to predict drug effects under a variety of circumstances is important. This unit provides a historical perspective of classical receptor theory and the currently used operational model of drug effects. The mechanism of drug receptor function is also described in terms of the various iterations of the ternary complex model, the two‐state theory for ion channels, and a probabilistic model of multiple receptor conformations.Curr. Protoc. Pharmacol. 41:1.2.1‐1.2.28. © 2008 by John Wiley & Sons, Inc.