Directed energy deposition (DED) is a branch of additive manufacturing (AM) processes in which a feedstock material in the form of powder or wire is delivered to a substrate on which an energy source such as laser beam, electron beam, or plasma/electric arc is simultaneously focused, thus forming a small melt pool and continuously depositing material, layer by layer. DED has several unique advantages compared to other AM processes, such as site-specific deposition and repair, alloy design, and three-dimensional printing of complex shapes. Herein, recent advances as well as the main aspects governing laser-material interactions during the DED process, melt pool thermal behavior, advanced in situ monitoring, and interaction mechanisms are critically reviewed. The most critical processing variables and their influence on the deposited material properties, along with defect formation mechanisms and characterization techniques, are also identified and discussed. An overview of high-end applications, current challenges associated with DED processing, and a critical outlook of the technology are presented.