The commercial interests in functional foods containing probiotics are gaining significance in view of increasing studies on their role in digestive tract. Probiotic dairy foods containing health-promoting bacteria are important segment of functional food market. Various health benefits have been attributed to specific strains of lactic acid bacteria or food containing these probiotic cultures. Probiotic-containing foods are considered to improve general gut health and natural defenses of body, and lower blood cholesterol level. Specific probiotic microbes can alleviate or prevent diverse intestinal diarrhea-inducing disorders, cause prophylaxis of intestinal and urogenital infections, inhibit mutagenicity of intestinal contents, and reduce incidence of intestinal tumors. Recent increasing evidences on health effects of probiotics have triggered consumer interest in this category of functional foods. Rational approach needs to be applied in selection of strains for probiotic preparation to achieve required functionality. Present article focuses on some prominent probiotic candidates and criteria for their inclusion in functional food sector. Various health claims of probiotics on gastrointestinal disorders, anticarcinogenic effects, and anti-cholestrimic effects, and possible mechanistic explanations for their functionality are highlighted.