There has been a tremendous increase in the number of approved drugs derived from recombinant proteins; however, their development as potential drugs has been hampered by their instability that causes difficulty to formulate them as therapeutic agents. It has been shown that the reactivity of thiol and disulfide functional groups could catalyze chemical (i.e., oxidation and beta-elimination reactions) and physical (i.e., aggregation and precipitation) degradations of proteins. Because most proteins contain a free Cys residue or/and a disulfide bond, this review is focused on their roles in the physical and chemical stability of proteins. The effect of introducing a disulfide bond to improve physical stability of proteins and the mechanisms of degradation of disulfide bond were discussed. The qualitative/quantitative methods to determine the presence of thiol in the Cys residue and various methods to derivatize thiol group for improving protein stability were also illustrated.