Dietetic significance of dahi, an Indian fermented milk product is well documented. Consumers inclination towards healthful foods has resulted in renewed interest in dahi. Adoption of diverse technology for dahi manufacture Results in wide variation in the chemical and microbiological quality of dahi available in the market. Attempts should be made towards process standardization for dahi manufacture to have a consistent quality product with augmented dietetic properties to project dahi into the global market as a potential functional food. Attempt has been made to review literature on technological and microbiological aspects of dahi manufacture to recommend innovative approaches to augment the functional properties of traditional dahi. Both review and research papers related to biotechnological aspects influencing the nutritional and therapeutic of dahi published in diverse Journals have been considered. Reviewed literature indicated that functional properties of traditional dahi could be enhanced either by modification of basic milk, exopolysaccharide producing starter cultures, bacteriocin producing starter cultures, introduction of probiotic cultures and inclusion of diverse food additives such as fruit juices, herbs and spices. Adoption of recommended biotechnological modifications in the traditional method of dahi manufacture would enhance the biofunctionality of dahi and can be projected as a functional food in the world market.