Anticancer drug discovery and development are experiencing a paradigm shift from cytotoxic therapies to more selective therapies that target underlying oncogenic abnormalities. Many newer therapies are cytostatic, for which objective tumour shrinkage is an inappropriate response parameter. There is a growing need to develop surrogate endpoints of drug efficacy to speed up the process of finding effective drug combinations for phase III trials. This review focuses on the developing field of functional magnetic resonance imaging (MRI) and its potential applications in the pharmacodynamic evaluation of existing and new cancer therapeutics. Dynamic contrast enhanced MRI, which is currently being used to evaluate anti-angiogenic, and anti-vascular agents in human trials will be reviewed in detail. The requirements that must be met before incorporating functional MRI techniques into clinical protocols are also discussed.