Pancreatic cancer is a largely chemo-resistant disease with a poor prognosis. Despite the adoption of gemcitabine monotherapy as a standard of care, outcomes remain poor. Until recently randomized phase III studies have not demonstrated superiority of various cytotoxic combinations or a number of the newer biologic targeted drugs. The situation has changed with capecitabine and erlotinib, either of which in combination with gemcitabine produces a small increase in survival. Erlotinib is a small molecule tyrosine kinase inhibitor against epidermal growth factor receptor which has an important role in the molecular pathogenesis of pancreatic cancer. In both pre-clinical and early clinical evaluation it has shown anti-tumor activity against pancreatic cancer in combination with gemcitabine. A randomized phase III study in locally advanced and metastatic pancreatic cancer has shown a survival advantage for the combination of gemcitabine plus erlotinib over gemcitabine alone. The rationale for the clinical development of erlotinib in combination with gemcitabine in pancreatic cancer culminating in this randomized trial, together with pharmacologic, toxicity and patient selection considerations form the focus of this review.