As a quantitative indicator of drought, drought index plays an important role in the monitoring and forecasting of drought and water resources management, and it is also a useful research tool in the field of hydrology and water resources. Over the last decade, the primary progress in the development and improvement of drought index involved the introduction of evapotranspiration as a factor of the index calculation, which can improve the parameter accuracy in model simulation and combine with the model algorithm of hydrological process. The application of drought index included the inversion and prediction of regional drought, crop yield prediction, forest fire detection, and paleoclimate reconstruction. The development and application of drought index provided an effective tool for regional drought monitoring and water resources management; however, the quantification and comprehensive evaluation of drought index should be considered as research priorities, which can help improve the accuracy and reliability of model monitoring and thus provide new options and technical approaches for rapid monitoring of drought.