Fructooligosaccharides (FOS) are naturally sourced, low-calorie carbohydrates that resist human digestive enzymes in the gastrointestinal tract. They are selectively fermented by certain Lactobacillus and Bifidobacterium species in the colon, thereby producing short-chain fatty acids (SCFAs). This process promotes the growth of beneficial microbiota while inhibiting pathogenic microorganisms. Consequently, they are classified as prebiotics. By interacting with the gut microbiota, FOS elicit various physiological effects and have attracted considerable research attention in functional food studies due to their favorable physicochemical and biological properties. This review systematically summarizes and critically evaluates recent advances on the physiological functions of FOS, covering their roles in maintaining intestinal microbial balance, reducing plasma levels of cholesterol, phospholipids, and triglycerides, regulating blood glucose levels, and enhancing immunity. Their potential involvement in tumour inhibition and mineral absorption is also discussed. Furthermore, this review examines recent progress in the application of FOS in food systems, including baked goods, meat products, dairy and non-dairy beverages, and animal feed. Special emphasis is placed on emerging in-situ enzymatic conversion technologies, which could enable more flexible and cost-effective utilization of FOS. Additionally, current common biosynthetic strategies are also outlined. Overall, this review highlights the key challenges and future prospects of FOS in functional foods, and provides critical insights for its application in personalized nutrition and disease management.