Clozapine (CLOZ) is an atypical antipsychotic drug being used with increasing frequency throughout the world and has recently been commercially marketed in the United States. Its unique properties make it a promising but challenging drug to use in the treatment of schizophrenia. In order to use CLOZ most effectively and efficiently, clinicians must be aware of its potential benefits and risks. This report is a review and critical evaluation of current knowledge regarding the clinical efficacy and side effects of CLOZ. Although CLOZ has proven to be effective in some treatment-refractory schizophrenic patients and to produce relatively few extrapyramidal side effects compared to classical neuroleptic drugs, several issues require further investigation including what defines neuroleptic intolerance, the optimal dose range, and the appropriate duration of a CLOZ treatment trial. Similarly, studies are needed to determine what role CLOZ should have in the treatment of patients with predominantly negative symptoms and those patients who are only partially responsive to standard neuroleptics. In addition, important questions remain as to what other conditions might be indications for CLOZ, for example, schizoaffective disorder, affective psychoses, and idiopathic Parkinson's disease.