With 2005 retail sales close to $4.8 million, cultured dairy products are driving the growth of dairy foods consumption. Starter cultures are of great industrial significance in that they play a vital role in the manufacturing, flavor, and texture development of fermented dairy foods. Furthermore, additional interest in starter bacteria has been generated because of the data accumulating on the potential health benefits of these organisms. Today, starter cultures for fermented foods are developed mainly by design rather than by the traditional screening methods and trial and error. Advances in genetics and molecular biology have provided opportunities for genomic studies of these economically significant organisms and engineering of cultures that focuses on rational improvement of the industrially useful strain. Furthermore, much research has been published on the health benefits associated with ingesting cultured dairy foods and probiotics, particularly their role in modulating immune function. The aim of this review is to describe some of the major scientific advances made in starter and non-starter lactic acid bacteria during the past 10 yr, including genomic studies on dairy starter cultures, engineering of culture attributes, advances in phage control, developments in methods to enumerate lactic acid bacteria and probiotics in dairy foods, and the potential role of cultured dairy foods in modulation of immune function.