Caffeine, a purine alkaloid is a constituent of widely consumed beverages. The scientific evidence which has proved the harm of this alkaloid has paved the way for innumerable research in the area of caffeine degradation. In addition to this, the fact that the by-products of the coffee and tea industry pollute the environment has called for the need of decaffeinating coffee and tea industry's by-products. Though physical and chemical methods for decaffeination are available, the lack of specificity for removal of caffeine in these techniques and their non-eco-friendly nature has opened the area of microbial and enzymatic degradation of caffeine. Another important application of microbial caffeine degradation apart from its advantages like specificity, eco-friendliness and cost-effectiveness is the fact that this process will enable the production of industrially and medically useful components of the caffeine degradation pathway like theobromine and theophylline. This is a comprehensive review which mainly focuses on caffeine degradation, large-scale degradation of the same and its applications in the industrial world. © 2011 Springer-Verlag.