Background: Cost-effectiveness is a tool to maximize health benefits and to improve efficiency in healthcare. However, efficient outcomes are not always the most equitable ones. Distributional cost-effectiveness analysis (DCEA) offers a framework for incorporating equity concerns into cost-effectiveness analysis. Objective: This systematic review aims to outline the challenges and limitations in applying DCEA in healthcare settings. Methods: We searched Medline, Scopus, BASE, APA Psych, and JSTOR databases. We also included Google Scholar. We searched for English-language peer-reviewed academic publications, while books, editorials and commentary papers were excluded. Titles and abstract screening, full-text screening, reference list reviews, and data extraction were performed by the main researcher. Another researcher checked every paper for eligibility. Details, such as study population, disease area, intervention and comparators, costs and health effects, cost-effectiveness findings, equity analysis and effects, and modelling technique, were extracted. Thematic analysis was applied, focusing on challenges, obstacles, and gaps in DCEA. Results: In total, 615 references were identified, of which 18 studies met the inclusion criteria. Most of these studies were published after 2017. DCEA studies were mainly conducted in Europe and Africa and used quality health-adjusted measurements. In the included studies, absolute inequality indices were used more frequently than relative inequality indices. Every stage of the DCEA presented challenges and/or limitations. Conclusion: This review provides an overview of the literature on the DCEA in healthcare as well as the challenges and limitations related to the different steps needed to conduct the analysis. In particular, we found problems with data availability, the relative unfamiliarity of this analysis among policymakers, and challenges in estimating differences among socioeconomic groups.