Capsule endoscopy (CE) is a novel technology that facilitates highly effective and noninvasive imaging of the small bowel. Although its efficacy in the evaluation of obscure gastrointestinal bleeding (OGIB) has been proven in several trials, data on uses of CE in different small bowel diseases are rapidly accumulating in the literature, and it has been found to be superior to alternative diagnostic tools in a range of such diseases. Based on literature evidence, CE is recommended as a first-line investigation for OGIB after negative bidirectional endoscopy. CE has gained an important role in the diagnosis and follow-up of Crohn's disease and celiac disease and in the surveillance of small bowel tumors and polyps in selected patients. Capsule retention is the major complication, with a frequency of 1%-2%. The purpose of this review was to discuss the procedure, indications, contraindications and adverse effects associated with CE. We also review and share our five-year experience with CE in various small bowel diseases. The recently developed balloon-assisted enteroscopies have both diagnostic and therapeutic capability. At the present time, CE and balloon-assisted enteroscopies are complementary techniques in the diagnosis and management of small bowel diseases. (C) 2009 The WJG Press and Baishideng. All rights reserved.