Desiccant systems are heat-actuated cooling and dehumidification technology. With the recent advances in this technology, desiccant systems can now achieve a primary energy coefficient of performance (COP) between 1.3 and 1.5, with potential to go to 1.7 and higher. It is becoming one of the most promising alternatives to conventional cooling systems. Two important and well-known advantages of desiccant cooling systems are that they are CFC free and they can reduce the electricity peak load. Another important but lesser-known advantage of desiccant technology is its potential for energy conservation. The energy impact study in this report indicated that a possible 13% energy saving in residential cooling and 8% in commercial cooling is possible. Great energy saving potential also exists in the industrial sector if industrial waste heat can be used for desiccant regeneration. The latest study on desiccant-integrated building heating, ventilating, and air conditioning (HVAC) systems indicated that the initial cost for the conventional cooling equipment was greatly reduced by using desiccant technology because of downsized compressors, fans, and ductworks. This cost reduction was more than enough to offset the cost of desiccant equipment. Besides, the system operation cost was also reduced. All these indicate that desiccant systems are also cost effective. This study provides an updated state-of-the-art assessment forsiccant technology in the field of desiccant materials, systems, computer models, and theoretical analyses. From this information the technology options were derived and the future research and development needs were identified. Because desiccant technology has already been applied in the commercial building sector with very encouraging results, it is expected that future market breakthroughs will probably start in this sector. A market analysis for the commercial building application is therefore included.