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Transcranial magnetic stimulation (TMS) is a non-invasive technique to stimulate the brain, while electroencephalography (EEG) is a non-invasive technique to record its electrical activity. Their combined use (TMS–EEG) has been established only relatively recently, after successful development of TMS-compatible EEG amplifiers. TMS-EEG offers the unparalleled opportunity to directly perturb the brain with TMS and simultaneously record its response with EEG. This allows inferences on causal input–output relationships, therefore going critically beyond purely observational techniques, such as resting-state EEG or functional MRI, in the study of brain dynamics. This consensus review updates the work of Tremblay and coworkers [Clin Neurophysiol 2019; 130: 802–844]. Since then, substantial advances have been made in understanding contamination of TMS–EEG signals by physiological and non-physiological artifacts, as well as in developing strategies to avoid or control them. In parallel, new insights have emerged regarding the physiological mechanisms underlying TMS-EEG responses and their diagnostic and prognostic utility in a broad range of psychiatric and neurological disorders. As such, TMS-EEG is rapidly shaping a dynamic new field in clinical neurophysiology and neuroscience. This review provides a critical and comprehensive synthesis of current knowledge, including practical guidance for implementing TMS-EEG in the clinical setting.