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Regional climate models (RCMs) have been developed and extensively applied for dynamically downscaling coarse resolution information from different sources, such as general circulation models (GCMs) and reanalyses, for different purposes including past climate simulations and future climate projection. Thus far, the nature, the methods, and a number of crucial issues concerning the use of dynamic downscaling are still not well understood. The most important issue is whether, and if so, under what conditions dynamic downscaling is really capable of adding more information at different scales compared to the GCM or reanalysis that imposes lateral boundary conditions (LBCs) to the RCMs. There are controversies regarding the downscaling ability. In this review paper we present several factors that have consistently demonstrated strong impact on dynamic downscaling ability in intraseasonal and seasonal simulations/predictions and future projection. Those factors include setting of the RCM experiment (e.g. imposed LBC quality, domain size and position, LBC coupling, and horizontal resolution); as well as physical processes, mainly convective schemes and vegetation and soil processes that include initializations, vegetation specifications, and planetary boundary layer and surface coupling. These studies indicate that RCMs have downscaling ability in some aspects but only under certain conditions. Any significant weaknesses in one of these aspects would cause an RCM to lose its dynamic downscaling ability. This paper also briefly presents challenges faced in current RCM dynamic downscaling and future prospective, which cover the application of coupled ocean-atmosphere RCMs, ensemble applications, and future projections. © 2014 Elsevier B.V.