Abstract: Molecular targeted therapy and immunotherapy have demonstrated their efficacy in various types of tumors, thus becoming emerging fields and directions in cancer treatment. Preclinical models, including two-dimensional and three-dimensional cell culture models, genetically engineered mouse models, organoid models, and patient-derived xenograft (PDX) models, have become effective tools for studying tumor mechanisms, developing anti-tumor drugs, and predicting clinical drug efficacy. However, tumor heterogeneity and the complexity of the microenvironment can affect the authenticity and accuracy of functional tests based on these preclinical models in varying degrees. This review summarizes the development of preclinical models and the applicability and limitations of functional assays in drug testing and combined clinical trials. To better apply them in clinical settings, we explored how to utilize functional testing through translational medicine to develop towards in vitro diagnostics (IVD), and analyzed the challenges currently facing functional testing in its move towards the field of IVD.