Gamma-aminobutyric acid (GABA) is a non-protein amino acid widely distributed in nature and extensively explored for its numerous physiological functions and effects on metabolic disorders. Lactic acid bacteria (LAB) are one of the most important GABA producers, vigorously pursued due to their high GABA content and generally regarded as safe (GRAS) status that allows for direct formulation in various GABA-enriched food products. To meet the strict requirements of the food and nutraceutical industries, the biosynthesis of GABA is typically preferred over the chemical synthesis route. The production of GABA varies among various strains of LAB and is affected by different fermentation conditions. Hence, optimizing the fermentation conditions to enhance the activity of the key enzyme glutamic acid decarboxylase is essential to maximize GABA production. This paper reviews the beneficial effects of GABA on human health and its applications in fermented food products. A particular emphasis is given to the biosynthetic approach for producing GABA by various LAB species the microbial fermentation route. Efficient strategies for enhancing GABA production through optimization of the fermentation conditions, mode of fermentation, two-step fermentation, co-culturing approach, immobilization technique and genetic engineering are discussed in detail.