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Herbal Dairy Supplements form a distinct group of functional foods, as milk and milk products act as efficient carriers for functional ingredients. The interest of the population is shifting from taste to health and the market for these supplements is expected to grow rapidly. The emergence of new viral diseases has also contributed to an interest towards immunity boosting supplements. Several researches on incorporation of herbal ingredients in dairy foods are carried out by prominent food and dairy institutions, but very few are commercialized. The vast knowledge embedded in Indian traditional medicine on use of herbs is not explored enough and the potential remains. Active research combined with validation studies, effective food laws and innovative marketing shall provide opportunities for India to emerge as a leader in Herbal Dairy segment. The review focuses on defining herbal dairy supplements, research update and issues, prospective herbs, market status and regulations.