Cancer is a heterogeneous disease caused by diverse genomic alterations in oncogenes and tumor suppressor genes. Despite recent advances in high-throughput sequencing technologies and development of targeted therapies, novel cancer drug development is limited due to the high attrition rate from clinical studies. Patient-derived xenografts (PDX), which are established by the transfer of patient tumors into immunodeficient mice, serve as a platform for co-clinical trials by enabling the integration of clinical data, genomic profiles, and drug responsiveness data to determine precisely targeted therapies. PDX models retain many of the key characteristics of patients' tumors including histology, genomic signature, cellular heterogeneity, and drug responsiveness. These models can also be applied to the development of biomarkers for drug responsiveness and personalized drug selection. This review summarizes our current knowledge of this field, including methodologic aspects, applications in drug development, challenges and limitations, and utilization for precision cancer medicine.