Marine sponges, the sessile invertebrates of the Phylum porifera are invaluable tool in current research. They remain as a goldmine to chemist and pharmacologist due to its defensive weapons, the secondary metabolites. Endogenous peptides from marine sponges and associated microorganisms are promising lead compound for drug development. Some of the compounds are under clinical trials. These peptides can act against variety of diseases in humans including bacterial, fungal, protozoan, HIV, inflammatory and even tumor. This review focuses on sponge symbiotic association with other organisms, significance of peptides as secondary metabolites and its pharmacological effects by highlighting its role as antbacterial, anti-fungal, anti-HIV and anti-tumor agents. Sponge-microbial associations are found to be very specific in the production of particular bioactive compounds.