The development of neutralizing antibodies (inhibitors) against factor VIII (fVIII) or factor IX (fIX) is the most serious complication of replacement therapy in persons with congenital hemophilia. Despite decades of successful replacement therapy, many aspects regarding the immune response to fVIII and fIX remain unclear. Furthermore, fVIII inhibitors can also arise as autoantibodies in individuals with no prior history of hemophilia A. Because they are no longer responsive to fVIII or fIX replacement therapy, persons with fVIII and fIX inhibitors can suffer from life- and limb-threatening bleeding events. While bypassing agents can be utilized to control bleeding, they are less effective and have increased thrombotic risks compared to factor-specific concentrates. Thus, strategies to eradicate fVIII and fIX allo- and auto-antibodies in patients with inhibitors remain important. This review summarizes our current understanding of the nature of fVIII and fIX inhibitors, risk factors for inhibitor development, and strategies to mitigate the clinical consequences of inhibitors and to restore immune tolerance to fVIII and fIX.