Inulin is a term applied to a heterogeneous blend of fructose polymers found widely distributed in nature as plant storage carbohydrates; it is a functional food ingredient that provides unique combination of technological properties. Furthermore, it provides nutritional benefits, which results in better health and attenuation of the risk of many diseases. Inulin has neutral taste, is colorless, and thereby only minimally influences the organoleptic characteristics of product. The high solubility of inulin enables it to be fortified in dairy products such as milk drinks, yogurt, cheeses, and desserts. The ability of inulin to form cream when sheared in skim milk provides good mouth feel to the food to which it is incorporated. In lieu of this, it is also used as a fat replacer. Several animal and human studies have shown inulin to function as a prebiotic, in promoting good digestive health, influencing lipid metabolism and decreasing risk of osteoporosis by increasing calcium absorption. Inulin is also found to exhibit some effect on insulinaemia and glycemia, as well as reduce the risk of colon cancer, breast cancer, and tumor growth. This review gives emphasis on the major application of inulin in functional and health aspects.