A drug product combines pharmacologic activity with pharmaceutical properties. Desirable performance characteristics are physical and chemical stability, ease of processing, accurate and reproducible delivery to the target organ, and availability at the site of action. For the dry powder inhaler (DPI), these goals can be met with a suitable powder formulation, an efficient metering system, and a carefully selected device. This review focuses on the DPI formulation and development process. Most DPI formulations consist of micronized drug blended with larger carrier particles, which enhance flow, reduce aggregation, and aid in dispersion. A combination of intrinsic physicochemical properties, particle size, shape, surface area, and morphology affects the forces of interaction and aerodynamic properties, which in turn determine fluidization, dispersion, delivery to the lungs, and deposition in the peripheral airways. When a DPI is actuated, the formulation is fluidized and enters the patient's airways. Under the influence of inspiratory airflow, the drug particles separate from the carrier particles and are carried deep into the lungs, while the larger carrier particles impact on the oropharyngeal surfaces and are cleared. If the cohesive forces acting on the powder are too strong, the shear of the airflow may not be sufficient to separate the drug from the carrier particles, which results in low deposition efficiency. Advances in understanding of aerosol and solid state physics and interfacial chemistry are moving formulation development from an empirical activity to a fundamental scientific foundation.