Bioactive compounds are a type of chemical substance found in plant sources. Lycopene, carotenoids, phytochemicals, phenolic compounds, and anthocyanin are a few bioactive compounds. These compounds are rich in antimicrobial, antioxidant, and free radical‐scavenging properties. But these compounds are easily degraded. In order to enhance the chemical stability and the retention properties of functional ingredients, encapsulation is indispensable. This paper reviews the two important methods of encapsulation of bioactive components and the novelties in these techniques. Spray‐drying and freeze‐drying techniques are commonly used for encapsulation in the food and pharmaceutical industries. The former is a quick and high‐temperature process, while the latter is a time‐consuming and low‐temperature procedure. The inlet temperature during spray drying is maintained between 120 and 190°C, whereas during freeze drying, a temperature of −80°C to −20°C is maintained. For effective encapsulation, the optimization of the process conditions such as the temperature, pressure, feed rate, airflow rates, and selection of wall materials are essential. In this paper, the influence of these parameters on encapsulation efficiency and product stability is also discussed. Practical Applications The spray‐drying and freeze‐drying techniques find their application in the food and chemical industries for the purpose of encapsulation and drying. The former technique helps transform liquid foods to powder and thereby extending their shelf life. The encapsulation of some biologically active components helps better retention and delivery of the components. Spray drying is a technique in which liquid foods are converted to powdered form. These techniques have been used for a very long time in the dairy industry. But in recent times, they have been used in the pharmaceutical industries as well. Their main application in the pharmaceutical industry is drug delivery. Freeze drying is a low‐temperature encapsulation process which is mainly used for the encapsulation of functional foods. The most commonly spray‐dried active materials include oleoresins, natural food colors, natural antioxidants, lipids, flavors, and functional foods. Probiotic sources such as bacterial cultures are the main freeze‐dried products. In this review, the practical applications of the techniques are elaborated.