Functional foods are nutritional compounds which also provide health and medicinal benefits. Daily food intake has much impact on the quality of life, and therefore inclusion of functional foods is now essential to our diet. Nutraceuticals are neither food nor drug but are added to food to provide extra nutritional and physiological properties. Though nutraceutical compounds provide minimal actions, their regular involvement in the diet can provide major and long‐term health benefits. Global demand for additional and sustainable biomass for the production of important metabolites with nutraceutical potential has resulted in renewed interest in seaweeds. Seaweeds have been consumed from ancient times in Asian areas, and in recent times they have been demonstrated to possess many medicinal effects. Seaweeds are considered a rich source of various nutritional ingredients and metabolites that have pharmaceutical properties. It has been observed that total protein, from terrestrial plants such as soybean and wheat, produces an allergic response on consumption. Therefore, seaweed proteins can be considered a promising source for food industries. Overall, seaweeds are a rich source of PUFAs, metabolites, proteins, sulfated polysaccharides, vitamins, and minerals, which are all responsible for different bioactivities; they are therefore considered a promising functional food (nutraceutical). In this review we discuss the nutraceutical potential of seaweeds regarding different metabolites (primary and secondary), variation in composition, probable biological applications, limitations, research gaps, and future prospects.