MicroRNAs (miRNAs) are small non-coding RNA molecules of 21–23 nucleotides that control gene expression at the post-transcriptional level. They have been shown to play a vital role in a wide variety of biological processes and dysregulated expression of miRNAs is observed in many pathologies. Understanding the mechanism of action and identifying functionally important mRNA targets of a specific miRNA are essential to unravelling its biological function and to assist miRNA-based drug development. This review summarizes the current understanding of the mechanistic aspects of miRNA-mediated gene repression and focuses on the different approaches for miRNA target identification that have been proposed in recent years.