Seaweeds are an excellent source of unique antioxidant phytochemicals, dietary fibres, essential amino acids, vitamins, polyunsaturated fatty acids and minerals. The presence of such structurally diverse and high value bioactive compounds has led to popularization of seaweed as functional food ingredient in global health supplement market. India, with a long coastline of 8100 km and exclusive economic zone of 2.17 million km2, is rich in diverse seaweed resources belonging to almost 700 species. However, food and nutraceutical application of Indian seaweed is highly constrained. Apart from Kappaphycus alvarezii, there is no systematic commercial cultivation of seaweed in India. The regulatory framework for use of seaweed as food is still developing and consumer acceptance is still low. However, there is a timely and renewed interest from different government agencies and research organisations to develop a thriving food and nutraceutical industry using India’s vast seaweed resources. The review briefly describes the nutritional and functional food potential of the seaweed and goes on to discuss the scope of seaweed utilization in food and nutraceutical industry in India. Further, the review has identified the regulatory challenges and quality control requirements for use of seaweeds in food and nutraceuticals.