A structural perspective of drug target and anti-target proteins, and their molecular interactions with biologically active molecules, largely advances many areas of drug discovery, including target validation, hit and lead finding and lead optimisation. In the absence of experimental 3D structures, protein structure prediction often offers a suitable alternative to facilitate structure-based studies. This review outlines recent methodical advances in homology modelling, with a focus on those techniques that necessitate consideration of ligand binding. In this context, model quality estimation deserves special attention because the accuracy and reliability of different structure prediction techniques vary considerably, and the quality of a model ultimately determines its usefulness for structure-based drug discovery. Examples of G-protein-coupled receptors (GPCRs) and ADMET-related proteins were selected to illustrate recent progress and current limitations of protein structure prediction. Basic guidelines for good modelling practice are also provided.