Direct alkaline alcohol fuel cells (DAAFCs) have attracted increasing interest over the past decade because of their favourable reaction kinetics in alkaline media, higher energy densities achievable and the easy handling of the liquid fuels. In this review, principles and mechanisms of DAAFCs in alcohol oxidation and oxygen reduction are discussed. Despite the high energy densities available during the oxidation of polycarbon alcohols they are difficult to oxidise. Apart from methanol, the complete oxidation of other polycarbon alcohols to CO2 has not been achieved with current catalysts. Different types of catalysts, from conventional precious metal catalyst of Pt and Pt alloys to other lower cost Pd, Au and Ag metal catalysts are compared. Non precious metal catalysts, and lanthanum, strontium oxides and perovskite-type oxides are also discussed. Membranes like the ones used as polymer electrolytes and developed for DAAFCs are reviewed. Unlike conventional proton exchange membrane fuel cells, anion exchange membranes are used in present DAAFCs. Fuel cell performance with DAAFCs using different alcohols, catalysts and membranes, as well as operating parameters are summarised. In order to improve the power output of the DAAFCs, further developments in catalysts, membrane materials and fuel cell systems are essential.