Today in 2004, the areal density in magnetic recording systems stands at approximately 100 Gbit/in2. It is projected to increase by 30-60% per year for the foreseeable future and reach 1 Tbit/in2 around the end of the decade. The corresponding rapid reduction in bit dimension poses significant challenges for lithography, both now in the thin-film head, and in the future on the disk, with the possible transition to patterned media. In thin-film head production, the critical dimension is now less than 100 nm and by 2006 will be less than 50 nm. To meet these requirements, the magnetic recording industry in recent years has been turning to direct-write electron-beam lithography. However, advances in both electron-beam systems and chemically-amplified resists will be required as areal density approaches the Terabit per square inch regime. No lithography is presently used on the disk or media, but this could change within a few years if discrete track media or patterned media is introduced. The key challenge will be establishing a low cost manufacturing capability at the very high resolution bit dimensions required. One new technology that shows considerable potential is nanoimprint lithography, but significant tool development will be required to improve throughput and provide sufficiently low cost per disk. High-resolution electron-beam systems and advanced resists will also be required to fabricate the 1X master templates. Further in the future, a combination of lithography and self-assembly of magnetic nanoparticles may provide a path to areal densities as high as 40 Tbit/in2.