Abstract: Recent progress in ultrafast lasers, ultrafast X-rays and ultrafast electron beams has made it possible to watch the motion of atoms in real time through pump-probe technique. In this review, we focus on how the molecular dynamics can be studied with ultrafast electron diffraction where the dynamics is initiated by a pumping laser and then probed by pulsed electron beams. This technique allows one to track the molecular dynamics with femtosecond time resolution and Ångström spatial resolution. We present the basic physics and latest development of this technique. Representative applications of ultrafast electron diffraction in studies of laser-induced molecular dynamics are also discussed. This table-top technique is complementary to X-ray free-electron laser and we expect it to have a strong impact in studies of chemical dynamics.