Moral disengagement, a term coined by Bandura, explains how people can hurt others and behave immorally, contradicting their beliefs and values and yet live peaceably with themselves. He developed a conceptual model of moral disengagement based on the Social Cognitive Theory of moral agency. By activating moral disengagement mechanisms, people can disregard their moral standards and behave immorally without any self-censure. This paper synthesises the extensive research on moral disengagement in a youth bullying context to demonstrate the conceptual strength of moral disengagement theory for research and interventions on bullying. It advances the understanding of the contextual basis of moral disengagement by examining its diverse role in bullying episodes that includes bullying perpetration, bullying victimisation and bullying bystanders. The analysis of the different components of moral disengagement representing the loci of the disengagement mechanisms sheds light on how the disengagement processes function in the youth bullying context. Its role as both a moderator and mediator further advances its divergent functioning in the youth bullying context. Finally, implications of the review for advancing knowledge on the moral basis of youth bullying are discussed with suggestions for the development of interventions to attenuate the use of moral disengagement.