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With the rapid increase in world population and power demand, the aging infrastructure of the existing power grid has caused many problems to electric utilities and customers in terms of system reliability, power quality, and customer satisfaction. Field tests show that the power grid has harsh and complex environmental conditions, dynamic topology changes, connectivity problems, interference, and fading, which make wireless communication very challenging in power grid environments. Recently, cognitive radio (CR) network is recognized as a promising technology to address the communication and networking problems of next-generation power grid, i.e., smart grid (SG). This article presents a comprehensive review about SG characteristics and CR-based SG applications. Also, architectures to support CR networks in SG applications, major challenges, and open issues have been discussed.