Abstract Background Microsatellite instability (MSI) causes hereditary non-polyposis colorectal cancer (HNPCC), and occurs in about 15 per cent of sporadic colorectal cancers. Although the basic mechanisms are not clear, there is increased understanding of the clinicopathological consequences of MSI. Methods Medline was searched for articles with a combination of keywords relating to MSI in colorectal cancer, focusing on molecular mechanisms, clinicopathological implications, and prognostic and predictive value. Emphasis was placed on articles from the past 5 years. Results The genetic mechanisms differ in hereditary (germline mutation) and sporadic (epigenetic silencing) colorectal cancer. The MSI pathway frequently has altered transforming growth factor β receptor II and BAX genes, often β-catenin, and occasionally p16INK4A and PTEN. Changes in K-ras, adenomatous polyposis coli and p53 are rare. Polymerase chain reaction testing for MSI is superior to immunohistochemistry, but complicated by the number and types of nucleotide markers. The Bethesda panel guides HNPCC testing, but guidelines are lacking for general screening. The presence and role of low-frequency MSI remains controversial. Tumours with MSI tend to occur in the proximal colon and be large, but they have a good prognosis. Their reduced response to adjuvant chemotherapy requires confirmation. Conclusion Research on colorectal cancer needs to be stratified according to microsatellite status in order further to explore the molecular mechanisms and clinicopathological consequences of MSI.