The food industry is directing new product development towards the area of functional foods and functional food ingredients due to consumers' demand for healthier foods. In this respect, probiotic dairy foods containing human-derived Lactobacillus and Bifidobacterium species and prebiotic food formulations containing ingredients that cannot be digested by the human host in the upper gastrointestinal tract and can selectively stimulate the growth of one or a limited number of colonic bacteria have been recently introduced into the market. The aim of these products is to affect beneficially the gut microbial composition and activities. Cereals offer another alternative for the production of functional foods. The multiple beneficial effects of cereals can be exploited in different ways leading to the design of novel cereal foods or cereal ingredients that can target specific populations. Cereals can be used as fermentable substrates for the growth of probiotic microorganisms. The main parameters that have to be considered are the composition and processing of the cereal grains, the substrate formulation, the growth capability and productivity of the starter culture, the stability of the probiotic strain during storage, the organoleptic properties and the nutritional value of the final product. Additionally, cereals can be used as sources of nondigestible carbohydrates that besides promoting several beneficial physiological effects can also selectively stimulate the growth of lactobacilli and bifidobacteria present in the colon and act as prebiotics. Cereals contain water-soluble fibre, such as beta-glucan and arabinoxylan, oilgosaccharides, such as galacto- and fructo-oligosaccharides and resistant starch, which have been suggested to fulfil the prebiotic concept. Separation of specific fractions of fibre from different cereal varieties or cereal by-products, according to the knowledge of fibre distribution in cereal grains, could be achieved through processing technologies, such as milling, sieving, and debranning or pearling. Finally, cereal constituents, such as starch, can be used as encapsulation materials for probiotics in order to improve their stability during storage and enhance their viability during their passage through the adverse conditions of the gastrointestinal tract. It could be concluded that functional foods based on cereals is a challenging perspective, however, the development of new technologies of cereal processing that enhance their health potential and the acceptability of the food product are of primary importance.