Inspired by naturally occurring species that allow for self-healing of nonfatal harm, self-healing polymeric materials have been prepared and represent a component of the intelligent materials family. These materials possess the inherent ability to rehabilitate damage produced during manufacturing and/or usage. The self-healing methodologies developed to date can be classified as intrinsic or extrinsic according to the method used to deliver the healing components to the target site in the material. Intrinsic self-healing operates through inter- or intra-macromolecular interactions, whereas extrinsic self-healing makes use of a pre-embedded healing agent. Extrinsic self-healing can be more easily realized in commercially available polymers because no structural modification of the matrix molecules is required. In recent years, extrinsic self-healing based on microencapsulated healing agents has attracted growing interest. Extrinsic self-healing in a variety of materials (including thermosets, thermoplastics, rigid, and elastomeric materials) has been demonstrated and offers recovery of both mechanical and non-structural functional properties. Self-healing based on microcapsules can deliver further results if combined with intrinsic self-healing. Using a bottom-up perspective, the current article presents a comprehensive review of recent progress in this field from the viewpoint of material design and preparation. The topics presented include (i) a basic overview of self-healing systems, (ii) microencapsulation techniques (e.g., in situ polymerization, interfacial polymerization, Pickering emulsion templating, miniemulsion polymerization, solvent evaporation/solvent extraction, sol–gel reaction, etc.), (iii) crack response of microcapsules, and (iv) healing chemistries (e.g., ring-opening metathesis polymerization, polycondensation, anionic ring opening polymerization, cationic polymerization, free radical polymerization, addition reaction, etc.). The strengths and weaknesses of each microencapsulation technique and type of healing chemistry are analyzed and compared. Additionally, formulation optimization (including species of healing agent and wall substance of capsules), processing, structure and property relationship, healing mechanisms, and stability are discussed. Trends and challenges are summarized at the end of the review. The scope of this review is to provide the reader with an overview of achievements to date and insight into future development for engineering applications.