Lactic acid bacteria (LAB) are widely used as starter cultures for the production of diverse fermented foods. There is a growing interest in the incorporation of functional foods in the daily diet to achieve health promotion and disease risk reduction. Numerous studies have focused on the production of biologically active peptides as nutraceuticals and functional food ingredients due to their health benefits. Current activities include development of encapsulated probiotics using lactobacilli, production of compounds with pharmaceutical and nutraceutical importance like folate, exopolysaccharides, bio-preservatives and dietary anti-oxidants from LAB.