Capsule endoscopy (CE) is an innovative technological breakthrough that for the first time provides a noninvasive method to obtain high-resolution imaging of the entire small bowel. Since its recent inception, the diagnostic utility of CE has become well established for the evaluation of diverse ulcerative and inflammatory disorders of the jejunum and ileum. The incredible resolution of its lens (0.1 mm) detects focal villous edema or atrophy, denuded, as well as ulcerated mucosal lesions missed by other imaging techniques. CE has been shown by meta-analysis to be a more sensitive method to investigate patients for small bowel Crohn's disease, with an incremental yield above 30% versus other imaging modalities. In patients with indeterminate colitis, CE is useful in distinguishing between ulcerative and Crohn's colitis. Among patients with established Crohn's disease, CE may be employed to determine: (1) the extent and severity of small bowel involvement, (2) postoperative recurrence, (3) post-therapy mucosal healing, and (4) whether active small bowel inflammatory lesions exist in the clinical setting of functional bowel disorder. Complications are rare and include capsule retention at stricture sites. The new patency capsule can diminish the risk of the latter problem in at-risk patients. CE can also serve as a guide to sites that require biopsies or dilatation by push or double-balloon enteroscopy. However, other causes of small bowel lesions may mimic Crohn's disease. A standard terminology system has thus been developed, and a CE Crohn's disease severity scoring index is currently undergoing validation studies.