Photodynamic therapy (PDT) has been developed as an alternative modality for the management of neoplastic and nonneoplastic diseases. It is a minimally invasive treatment that involves the interaction of a non-toxic photosensitizer (PS), light and molecular oxygen to generate reactive oxygen species (ROS), resulting in the destruction of unwanted cells and tissues. Discovery and development of new PSs with optimized properties are much crucial for achieving a desirable therapeutic efficacy. This review describes the photochemical and photobiological mechanisms of PDT, and outlines the recent progress in discovery and development of natural products and their derivatives as phototherapeutic drugs. The potential limitations and future perspectives of PDT in clinical application are also presented and discussed.