Cholangiocarcinoma (CCA) is the most common malignancy in patients with primary sclerosing cholangitis (PSC) and carries a high rate of mortality. Although the pathogenesis of CCA in PSC is largely unknown, inflammation-driven carcinogenesis concomitant with various genetic and epigenetic abnormalities are underlying factors. The majority of CCA cases develop from a dominant stricture (DS), which is defined as a stricture with a diameter < 1.5 mm in the common bile duct or < 1.0 mm in the hepatic duct. In PSC patients presenting with an abrupt aggravation of jaundice, pain, fatigue, pruritus, weight loss, or worsening liver biochemistries, CCA should be suspected and evaluated utilizing a variety of diagnostic modalities. However, early recognition of CCA in PSC remains a major challenge. Importantly, 30-50% of CCA in PSC patients are observed within the first year following the diagnosis of PSC followed by an annual incidence ranging from 0.5 to 1.5 per 100 persons, which is nearly 10 to 1000 times higher than that in the general population. Cumulative 5-year, 10-year, and lifetime incidences are 7%, 8-11%, and 9-20%, respectively. When PSC-associated CCA is diagnosed, most tumors are unresectable, and no effective medications are available. Given the poor therapeutic outcome, the surveillance and management of PSC patients who are at an increased risk of developing CCA are of importance. Such patients include older males with large-duct PSC and possibly concurrent ulcerative colitis. Thus, more attention should be paid to patients with these clinical features, in particular within the first year after PSC diagnosis. In contrast, CCA is less frequently observed in pediatric or female PSC patients or in those with small-duct PSC or concurrent Crohn's disease. Recently, new biomarkers such as antibodies to glycoprotein 2 have been found to be associated with an increased risk of developing CCA in PSC. Herein, we review the literature on the pathogenesis, incidence, clinical features, and risk factors, with a focus on various diagnostic modalities of PSC-associated CCA.