Invasive fungal infections are important causes of morbidity and mortality in hospitalised patients. Current therapy with amphotericin B and antifungal triazoles has overlapping targets and is limited by toxicity and resistance. The echinocandin lipopeptide caspofungin is the first of a new class of antifungal compounds that inhibit the synthesis of 1,3-beta-D-glucan. This homopolysaccharide is a major component of the cell wall of many pathogenic fungi and yet is absent in mammalian cells. It provides osmotic stability and is important for cell growth and cell division. In vitro, caspofungin has broad-spectrum antifungal activity against Candida and Aspergillus spp. without cross-resistance to existing agents. The compound exerts prolonged post-antifungal effects and fungicidal activity against Candida spp. and causes severe damage of Aspergillus fumigatus at the sites of hyphal growth. Animal models have demonstrated efficacy against disseminated candidiasis and disseminated and pulmonary aspergillosis, both in normal and in immunocompromised animals. Caspofungin possesses favourable pharmacokinetic properties and is not metabolised through the cytochrome P450 (CYP) enzyme system. It showed highly promising antifungal efficacy in Phase II and III clinical trials in immunocompromised patients with oesophageal candidiasis. Caspofungin was effective in patients with invasive aspergillosis intolerant or refractory to standard therapies. Based on its documented antifungal efficacy and an excellent safety profile, caspofungin has been approved recently by the US Food and Drug Administration for the treatment of invasive aspergillosis in patients who are refractory to or intolerant of other therapies (i.e., amphotericin B, lipid formulations of amphotericin B, and/or itraconazole). Phase III clinical trials in patients with candidaemia and in persistently febrile neutropenic patients requiring empirical antifungal therapy are ongoing. This paper reviews the preclinical and clinical pharmacology of caspofungin and its potential role for treatment of invasive and superficial fungal infections in patients.