Lymphocyte activation gene 3 (LAG-3) is a cell surface inhibitory receptor with multiple biological activities over T cell activation and effector functions. LAG-3 plays a regulatory role in immunity and emerged some time ago as an inhibitory immune checkpoint molecule comparable to PD-1 and CTLA-4 and a potential target for enhancing anti-cancer immune responses. LAG-3 is the third inhibitory receptor to be exploited in human anti-cancer immunotherapies, and it is considered a potential next-generation cancer immunotherapy target in human therapy, right next to PD-1 and CTLA-4. Unlike PD-1 and CTLA-4, the exact mechanisms of action of LAG-3 and its relationship with other immune checkpoint molecules remain poorly understood. This is partly caused by the presence of non-conventional signaling motifs in its intracellular domain that are different from other conventional immunoregulatory signaling motifs but with similar inhibitory activities. Here we summarize the current understanding of LAG-3 signaling and its role in LAG-3 functions, from its mechanisms of action to clinical applications.