The past few decades have witnessed a major leap in knowledge relating to the role of tumor microenvironment (TME) in carcinogenesis and evolving behavior of the tumor. Multiple factors within the TME modulate the cancer cells and the associated therapies. Stephen Paget first asserted that the microenvironment plays an important role in the growth of tumor metastasis. The most important player in the TME is cancer‐associated fibroblast (CAF) which significantly participates in the proliferation, invasion, and metastasis of tumor cells. CAFs show phenotypic and functional heterogeneity. Mostly CAFs originate from quiescent resident fibroblast or mesoderm‐derived precursor cells (mesenchymal stem cells), although several alternate sources of origin have been noted. However, due to lack of specific fibroblast‐restricted markers, it is very difficult to trace lineage and identify the biological origin of distinct subtypes of CAFs. CAFs are predominantly shown by several studies to mainly act as tumor‐promoting agents, however, tumor‐inhibiting actions are also being validated by several studies. A more objectified and comprehensive functional and phenotypic classification of CAF is required, which will help in better way for tumor management. Here, in this review, we have tried to review the current status of CAF origin, along with phenotypic and functional heterogeneity, and recent progress in CAF research.