This article is a review of literature on online formative assessment (OFA). It includes a narrative summary that synthesizes the research on the diverse delivery methods of OFA, as well as the empirical literature regarding the strong psychological benefits and limitations. Online formative assessment can be delivered using many traditional assessment methods. These assessments can be delivered using a variety of programs and software. The benefits of using OFAs include both gains in achievement scores and the development of essential complex cognitive processes, such as self‐regulation. While attention is paid to both K–12 and higher education settings, this article highlights how OFA has been used distinctly in each. This paper has high utility for both academics and practitioners.