The use of liquid sodium as a heat transfer fluid has shown great promise and application in nuclear power generation and it is now being utilized in concentrated solar thermal power (CSP) applications, owing to its favorable thermodynamic properties. Its implementation, however, comes with a unique array of technical issues in CSP applications, primarily the incompatibility of structural materials with liquid sodium in these operational environments. In this review, major damage mechanisms will be discussed, with a focus on their relevance to advanced CSP plants. Such mechanisms include corrosion, liquid metal embrittlement, carburization/de-carburization, erosion, creep, and thermal fatigue. The degradation factors such as impurities in the sodium (e.g. oxygen) and the dissolution of the structural material's alloying elements (Cr, Mn, Ni and Si, etc.) are also discussed. This review presents a holistic overview of these inter-connected mechanisms, and most importantly explores potential solutions to mitigate these issues, including better structural material candidates, robust plant operational parameters/design, better service life predictions, and improved purification and monitoring methods for stringent control of impurities. The future directions of research are also discussed to ensure the successful use of liquid sodium in the next generation of CSP technology.