Phallometry is an objective method of assessing male sexual arousal. The main applications in forensic psychiatry concern the evaluation of men charged with or convicted of sexual offences, the evaluation of those with suspected paraphilias not subject to the criminal justice system, risk assessment and measurement of response to sex offender treatment. In some jurisdictions, phallometry is incorporated into legal decisions about release from custody or discharge from secure hospitals. This paper provides a brief overview of the international development of phallometry, considers challenges to its broader adoption and discusses future directions for research and clinical practice.