The objective of this article is to provide a review of the fundamental aspects of body fluid balance and the physiological consequences of water imbalances, as well as discuss considerations for the optimal composition of a fluid replacement beverage across a broad range of applications. Early pioneering research involving fluid replacement in persons suffering from diarrheal disease and in military, occupational, and athlete populations incurring exercise- and/or heat-induced sweat losses has provided much of the insight regarding basic principles on beverage palatability, voluntary fluid intake, fluid absorption, and fluid retention. We review this work and also discuss more recent advances in the understanding of fluid replacement as it applies to various populations (military, athletes, occupational, men, women, children, and older adults) and situations (pathophysiological factors, spaceflight, bed rest, long plane flights, heat stress, altitude/cold exposure, and recreational exercise). We discuss how beverage carbohydrate and electrolytes impact fluid replacement. We also discuss nutrients and compounds that are often included in fluid-replacement beverages to augment physiological functions unrelated to hydration, such as the provision of energy. The optimal composition of a fluid-replacement beverage depends upon the source of the fluid loss, whether from sweat, urine, respiration, or diarrhea/vomiting. It is also apparent that the optimal fluid-replacement beverage is one that is customized according to specific physiological needs, environmental conditions, desired benefits, and individual characteristics and taste preferences.