Application of twin-screw processing in pharmaceutical industry has gained increasingly favor in last two decades. Twin-screw processing is solvent-free and easy to be integrated to continuous manufacturing to achieve many advantages, such as consistent product quality, easier scale-up, better in-process quality control. Two major applications of twin-screw processing are twin-screw melt granulation (TSMG) and twin-screw melt extrusion (TSE). TSMG relies on efficient heating and intensive mixing to facilitate binder coating on drug crystal and enable supreme tabletability of granules. TSE applied thermal and mechanical energy to change drug to the amorphous state which improves drug bioavailability. However, the thermal and mechanical stress in twin-screw processing may cause chemical and physical transformations of APIs. Unwanted chemical and physical transformations will jeopardize drug product quality. In Chapter 1, mechanism of TSMG was reviewed. The impact of processing parameters and drug-binder interactions on granule properties was discussed. The location and origin of the thermal and mechanical stress were also discussed. In Chapter 2, a miscible drug-binder system was used to study effect of the binder (HPC) level on granule properties and drug (acetaminophen) physicochemical change. The binder level was critical on granule properties, as insufficient binder caused high amount of ungranulated powder and excessive binder caused overgranulation. The amorphization of drug occurred at high binder level and was restricted to granule surface where the binder was enriched. In Chapter 3, the degradation of a thermal labile drug (gliclazide) was investigated when a miscible binder (HPC) was used in TSMG. TSMG process involved in a quick heating section and a slow cooling section. 60% of drug degradation occurred in the cooling and was correlated to granule temperature. Drug degradation and physicochemical change in the heating section was associated with specific mechanical energy input. The nature of drug physicochemical change was crystal defect other than amorphization. In Chapter 4, the drug degradation in TSE was modeled to predict degradation. Drug (ritonavir) degradation in TSE was found in an oxygen deprived condition and affected by the chemical environment of polymer (copovidone). A first-order kinetics model in combination with Arrhenius equation was validated to predict degradation when we used the measured processing temperature and residence time.