DNA polymerase theta (Polθ), a key mediator of the theta-mediated end-joining (TMEJ) pathway, has emerged as a promising synthetic lethal target for the treatment of cancers with homologous-recombination (HR) deficiency, particularly BRCA-mutated tumors. Polθ comprises an N-terminal helicase domain (HD) and a C-terminal polymerase domain (PD). The HD captures and synapses broken DNA ends, while the PD binds microhomology sequences, stabilizes them, and initiates DNA synthesis to complete double-strand break repair. Polθ overexpression in HR-deficient cancer cells enables cell survival by compensating for defective HR, creating a therapeutic vulnerability exploitable through targeted inhibition of Polθ. Herein, we summarized the action mechanisms of Polθ inhibitors in cancer treatment and provided the structural insights into the ATP-binding pocket of Polθ. Second, we discussed the Polθ inhibitors in clinical trials and Polθ inhibitor-based combination therapies. Third, we summarized recent progress in the design and development of Polθ modulators, including selective Polθ inhibitors and Polθ inhibitor-based dual inhibitors, from the perspectives of rational design, pharmacodynamics, and pharmacokinetics. Finally, we discussed the challenges and future directions in Polθ-targeted drug discovery.