Cytochrome P450 constitute a superfamily of heme-containing enzymes that catalyze the oxidative biotransformation of structurally diverse xenobiotics including drugs. Inhibition of P450 enzymes is by far the most common mechanism which can lead to DDIs. P450 inhibition can be categorized as reversible (competitive or non-competitive) or irreversible (mechanism-based inactivation). Mechanism-based P450 inactivation usually involves bioactivation of the xenobiotic to a reactive intermediate, which covalently modifies an active site amino acid residue and/or coordinates to the heme prosthetic group. Covalent modification of P450 enzymes can also lead to hapten formation and can in some cases trigger an autoimmune response resulting in toxicological consequences. Compared to reversible inhibition, irreversible inhibition more frequently results in unfavorable DDIs as the inactivated P450 enzyme has to be replaced by newly synthesized protein. For these reasons, most drug metabolism groups within pharmaceutical companies have well-established screening paradigms to assess mechanism-based inactivation of major human P450 enzymes by new chemical entities followed by in-depth mechanistic studies to elucidate the mechanism of P450 inactivation when a positive finding is discerned. A deeper understanding of the process leading to enzyme inactivation by drug candidates can lead to rational chemical intervention strategies to circumvent the P450 inactivation/bioactivation liability. Apart from structure-activity relationship studies, methodology to predict the magnitude of in vivo metabolic DDIs using in vitro P450 inactivation data and predicted human pharmacokinetics of the candidate drug also exists and can be utilized to project the extent of clinical DDIs against P450 enzyme-specific substrates. In this review, a comprehensive analysis of the biochemical basis and known structure-activity relationships for P450 inactivation by xenobiotics is described. In addition, the current state-of-the-art of the methodology used in predicting the magnitude of DDIs using in vitro P450 inactivation data and human pharmacokinetic parameters is discussed in detail.