Controlled fusion energy is one of the long term, non-fossil energy sources available to mankind. It has the potential of significant advantages over fission nuclear power in that the consequences of severe accidents are predicted to be less and the radioactive waste burden is calculated to be smaller. Fusion can be an important ingredient in the future world energy mix and can be part of an 'insurance policy' energy strategy to develop new sources as a hedge against environmental, supply or political difficulties connected with the use of fossil fuel and present-day nuclear power. Progress in fusion reactor technology and design is described for both magnetic and inertial fusion energy systems. The projected economic prospects show that fusion will be capital intensive, and the historical trend is towards greater mass utilization efficiency and more competitive costs. Recent studies emphasizing safety and environmental advantages show that the competitive potential of fusion can be further enhanced by specific choices of materials and design. The safety and environmental prospects of fusion appear to exceed substantially those of advanced fission and coal. For example, the level of radioactivity in a low activation fusion reactor at 1 year and at 100 years after shutdown is calculated to be about one-millionth of the radioactivity in a fission reactor of the same power. Likewise, the maximum plausible dose predicted at the site boundary in the case of a low activation fusion reactor is estimated to be between 100 and 500 times smaller than that estimated for a fission power plant. Clearly, a significant and directed technology effort is necessary to achieve these advantages. Typical parameters have been established for magnetic fusion energy reactors, and a tokamak at moderately high magnetic field (about 7 T on axis) in the first regime of MHD stability (β ≤ 3.5 I/aB) is closest to present experimental achievement. Further improvements of the economic and technological performance of the tokamak are possible through the following achievements: higher magnetic fields to lower the required plasma current and reactor size; higher values of the plasma beta, including reaching the second stable MHD regime, to lower the requirements on field and plasma current; and more efficient techniques to drive the plasma current. In addition, alternative, non-tokamak magnetic fusion approaches may offer substantive economic and operational benefits, although at present these concepts must be projected from a less developed physics base. For inertial fusion energy, reactor studies are at an earlier stage, but the essential requirements are a high efficiency (≥ 10%) repetitively pulsed pellet driver capable of delivering up to 10 MJ of energy on target, targets capable of an energy gain (ratio of energy produced to energy on target) of about 100, reactor chambers capable of absorbing the energy released per shot at conditions consistent with power generation, and effective means of isolating the target chamber and driver system.