Exosomes are nanoscale extracellular vesicles secreted by cells and enclosed by a lipid bilayer membrane containing various biologically active cargoes such as proteins, lipids, and nucleic acids. Engineered exosomes generated through genetic modification of parent cells show promise as drug delivery vehicles, and they have been demonstrated to have great therapeutic potential for treating cancer, cardiovascular, neurological, and immune diseases, but systematic knowledge is lacking regarding optimization of drug loading and assessment of delivery efficacy. This review summarizes current approaches for engineering exosomes and evaluating their drug delivery effects, and current techniques for assessing exosome drug loading and release kinetics, cell targeting, biodistribution, pharmacokinetics, and therapeutic outcomes are critically examined. Additionally, this review synthesizes the latest applications of exosome engineering and drug delivery in clinical translation. The knowledge compiled in this review provides a framework for the rational design and rigorous assessment of exosomes as therapeutics. Continued advancement of robust characterization methods and reporting standards will accelerate the development of exosome engineering technologies and pave the way for clinical studies.