Modularity is an important principle in software development that promotes breaking down a system into smaller, self-contained modules. In C#, modularity is achieved through the use of classes, namespaces, and assemblies. By designing code in a modular fashion, you can divide a complex system into smaller, manageable units with clear responsibilities. Modularity improves code organization, reusability, and maintainability. It allows for easier debugging, testing, and collaboration among developers.