Abstract Caffeine is a natural plant product found in many drinks, including coffee, tea, soft and energy drinks. Due to caffeine’s presence in the environment, microorganisms have evolved two different mechanisms to live on caffeine. The genetic maps of the caffeine N-demethylation pathway and C-8 oxidation pathway have been discovered in Pseudomonas putida CBB5 and Pseudomonas sp. CBB1, respectively. These genes are the only characterized bacterial caffeine-degrading genes, and may be of great value in producing fine chemicals, biofuels, and animal feed from coffee and tea waste. Here, we present preliminary results for production of theobromine and 7-methylxanthine from caffeine and theobromine, respectively, by two strains of metabolically engineered E. coli. We also demonstrate complete decaffeination of tea extract by an immobilized mixed culture of Klebsiella and Rhodococcus cells. These processes provide a first level demonstration of biotechnological utilization of coffee and tea waste.