Functional foods are foods that have a potentially positive effect on health beyond nutrition. It promotes optimal health and helps to reduce the risk of diseases. Functional food covers a variety of foods like; minimally processed, whole foods along with fortified, enriched or enhanced foods can all be functional foods. In the main, these foods have a potentially beneficial effect on health when consumed on a regular basis and at certain levels. This article elaborates on the importance of functional foods, health benefits, types and various sources of functional foods.