This chapter presents a review on the wireless capsule endoscopy (WCE) system and proposes a list of new features that are desired in the next generation Internet of Things (IoT)-based WCE system. As an intelligent device, it comprises of various sensors including on-chip image and color sensors, and physiological sensors like pH, temperature, and pressure which will offer a quick and accurate diagnostic tool to detect gastrointestinal abnormalities. Data-processing steps like filtering, noise cancellation, and amplification are applied to improve accuracy. The data is then transmitted to the data logger using radiofrequency technology for offline processing and diagnosis. Integrating IoT will offer real-time decision-making and more control over capsule functionality. We will also analyze the limitations of the current WCE technology and present an IoT-based WCE device that will improve both the accuracy and reliability of the system.