Palaeoenvironmental DNA (PalEnDNA) is defined as ancient DNA (aDNA) originating from disseminated genetic material within palaeoenvironmental samples. Sources of PalEnDNA include marine and lake sediments, peat, loess, till, ice, permafrost, palaeosols, coprolites, preserved gut contents, dental calculus, tephras, and soils as well as deposits in caves/rockshelters and at archaeological sites. PalEnDNA analysis provides a relatively new tool for Quaternary and archaeological sciences and its applications have included palaeoenvironmental and palaeodietary reconstructions, testing hypotheses regarding megafaunal extinctions, human–environment interactions, taxonomic studies and studies of DNA damage. Because PalEnDNA samples comprise markedly different materials, and represent wide-ranging depositional and taphonomic contexts, various issues must be addressed to achieve robust, reproducible findings. Such issues include climatic and temporal limitations, the biological origin and state (free versus bound) of PalEnDNA, stratigraphic reliability, sterile sampling, ability to distinguish modern from aDNA signals, DNA damage and PCR amplification, DNA extraction methods, and taxonomic resolution. In this review, we provide a non-specialist introduction to the use of PalEnDNA for Quaternary and archaeological researchers, assess attributes and limitations of this palaeoenvironmental tool, and discuss future prospects of using PalEnDNA to reconstruct past environments.