Over the past 3 decades, Ilizarov technique namely distraction histogenesis (DH) technique has been widely accepted and applied in orthopaedics and traumatology with outstanding clinical outcomes and emerging novel applications. This review focuses on the recent advances in understanding the biological mechanisms of DH, new methods for promoting bone consolidation in DH procedures and novel clinical applications of DH techniques. Tension stress regulates many genes during DH, including signaling transduction molecules, BMPs, inflammatory and angiogenic factors as well as epigenetic factors. DH also triggers systemic responses such as recruitment of mesenchymal stem cells (MSCs) and endothelial progenitor cells (EPCs). These activities play important roles in regulating bone regeneration and remodeling during DH. To promote bone formation in DH is still a clinical challenge, and minimal or non-invasive means for promoting bone consolidation are preferable, such as weight-bearing exercise, ultrasound and electromagnetic stimuli; whereas systemic administration of anabolic agents and hormones may also achieve better outcomes. Local cell transplantation and application of various biological factors at the right time may also be the choices. With better understanding of the biological mechanisms, applications of DH technique have now been extended for managing skin wound, joint disorders and avascular diseases. However, more basic or clinical researches are still needed to unravel the “magic” of DH technique. DH technique awakens and promotes human body’s self-regeneration potentials and leads to many novel treatment strategies. A substantial number of methods have been found to promote bone consolidation in DH to shorten the treatment duration and make the application of DH easier. Novel clinical applications of DH technique have now been extended to management of soft-tissue repair disorders, avascular diseases and others, with many more new biological mechanisms yet to be defined. A full understanding of DH technique may facilitate its wider and more appropriate clinical applications.