Identifying drug binding sites and elucidating drug action mechanisms are important components in a drug discovery process. In this review, we briefly compared three different approaches (sequence- based methods, structure-based methods and probe-based molecular dynamics (MD) methods) to identifying drug binding sites, and concluded that probe-based MD methods are much more advantageous in dealing with flexible target macromolecules and digging out druggable macromolecule conformations for subsequent drug screening. The applications of MD simulation to studying drug-target interactions were demonstrated with different types of target molecules, including lipid membrane, protein and DNA. The results indicate that MD simulations with enhanced sampling methods provide a powerful tool to determine free energy profiles/surfaces and identify important intermediate states, which are essential for the elucidation of drug action mechanisms. The future development of methods in MD simulations will benefit and speed up the drug discovery processes.