Atopic dermatitis is a chronic inflammatory skin disease associated with cutaneous hyperreactivity to environmental triggers and is often the first step in the atopic march that results in asthma and allergic rhinitis. The clinical phenotype that characterizes atopic dermatitis is the product of interactions between susceptibility genes, the environment, defective skin barrier function, and immunologic responses. This review summarizes recent progress in our understanding of the pathophysiology of atopic dermatitis and the implications for new management strategies.