The smart grid system is composed of the power infrastructure and communication infrastructure and thus is characterized by the flow of electric power and information, respectively. Although there is no doubt that the wireless communication architecture will play a significant role in smart grid, the wireless network introduces additional vulnerabilities, given the scale of potential threats. Therefore, the physical layer security issue is of first priority in the study of smart grid and has already attracted substantial attention in the industry and academia. In this paper, we aimed to present a general overview of the physical layer security in wireless smart grid and cover the effective countermeasures proposed in the literature of smart grid to date. We first investigate the security challenges from malicious attacks. Specifically, two typical forms of malicious attack in smart grid, namely, jamming and bad data injecting, are studied. In addition, the related countermeasures against these malicious attacks are illustrated. Further, we analyze the state of the art of the privacy issues in smart grid. The private information and privacy concerns are introduced, and then the effective solutions to privacy security are provided. Finally, voltage regulation, a security topic that has been hardly studied in the wireless smart grid domain, is presented. We expect that the work presented here will advance the research on smart grid security. Copyright © 2013 John Wiley & Sons, Ltd.