Today, the understanding of the sequence and structure of biologically relevant targets is growing rapidly and researchers from many disciplines, physics and computational science in particular, are making significant contributions to modern biology and drug discovery.  However, it remains challenging to rationally design small molecular ligands with desired biological characteristics based on the structural information of the drug targets, which demands more accurate calculation of ligand binding free-energy.  With the rapid advances in computer power and extensive efforts in algorithm development, physics-based computational chemistry approaches have played more important roles in structure-based drug design.  Here we reviewed the newly developed computational chemistry methods in structure-based drug design as well as the elegant applications, including binding-site druggability assessment, large scale virtual screening of chemical database, and lead compound optimization.  Importantly, here we address the current bottlenecks and propose practical solutions.