Worldwide interest in oligosaccharides has been increasing ever since they were accorded the prebiotic status. The oligosaccharides of various origin like, bacteria, algae, fungi and higher plants have been used extensively both as food ingredients and pharmacological supplements. The non-digestible oligosaccharides have been implicated as dietary fibre, sweetener, weight controlling agent and humectant in confectioneries, bakeries and breweries. Functional oligosaccharides have been found effective in gastrointestinal normal flora proliferation and pathogen suppression, dental caries prevention, enhancement of immunity, facilitation of mineral absorption, source of antioxidant, antibiotic alternative, regulators of blood glucose in diabetics and serum lipids in hyperlipidemics. Apart from the pharmacological applications, oligosaccharides have found use in drug delivery, cosmetics, animal and fishery feed, agriculture, etc. Keeping in view the importance of the functional oligosaccharides, we present an overview of their natural sources, types, structures, physiological properties. Conventional as well as novel synthesis, purification and analysis methods are summarized. Recent promising developments in this area are presented to facilitate their further exploitation.