Recent developments in the density-functional theory of electron correlations in many-body lattice models are reviewed. The theoretical framework of lattice density-functional theory (LDFT) is briefly recalled, giving emphasis to its universality and to the central role played by the single-particle density-matrix γ . The Hubbard model and the Anderson single-impurity model are considered as relevant explicit problems for the applications. Real-space and reciprocal-space approximations to the fundamental interaction-energy functional W[γ] are introduced, in the framework of which the most important ground-state properties are derived. The predictions of LDFT are contrasted with available exact analytical results and state-of-the-art numerical calculations. Thus, the goals and limitations of the method are discussed.