Caffeine (1,3,7-trimethylxanthine) is a naturally occurring, -commercially important alkaloid. It is an active psychostimulant which increases alertness and sustains concentration by overcoming fatigue. This makes caffeine one of the most widely consumed dietary chemicals, with the global consumption ranging from 80 to 400 mg caffeine per person per day. During coffee processing, various byproducts like pulp water, husk etc. containing appreciably high content of caffeine are generated and are discarded as wastes. Pulp, husk and other waste products from coffee and tea industries increase toxicity of surrounding landmass due to their caffeine content resulting in soil infertility. Effluents are often discharged into water bodies, contaminating drinking and surface water with caffeine and affecting the saprophytic organisms involved in essential biotransformation in the environment. Decaffeination therefore becomes an important step in coffee processing. In this aspect, microbial cells and enzymes, which are biological and non toxic, have been found to be more beneficial than conventional techniques using chemicals and energy. Several microbial strains and enzyme systems such as N-demethylases and caffeine oxidases have been discovered over the last two decades which serve are potential candidates for development of biodecaffeination techniques. The rarity of strains and the unstable nature of caffeine degrading enzymes are some of the challenges with scope for research and development in the area of biodecaffeination. © 2012 Springer Science+Business Media B.V. All rights reserved.