Atopic eczema (AE) is a chronic inflammatory skin disease characterized by pruritus, dry skin and an ongoing course of exacerbations and remissions. AE is a common disorder in children with a worldwide cumulative prevalence of 15–20% in this age group. AE has a strong familial predisposition. While AE is a complex disease with multiple gene involvement, recent interest has focused on genes involved in skin barrier/epidermal differentiation and in immune response/host defense. Recent developments and future directions on pathogenesis, diagnosis, natural course and prognosis are discussed.