Transglutaminase (EC 2.3.2.13) catalyses an acyl-transfer reaction in which the gamma-carboxamide groups of peptide-bound glutaminyl residues are the acyl donors. The enzyme catalyses in vitro cross-linking in whey proteins, soya proteins, wheat proteins, beef myosin, casein and crude actomyosin refined from mechanically deboned poultry meat. In recent years, on the basis of the enzyme’s reaction to gelatinize various food proteins through the formation of cross-links, this enzyme has been used in attempts to improve the functional properties of foods. Up to now, commercial transglutaminase has been merely obtained from animal tissues. The complicated separation and purification procedure results in an extremely high price for the enzyme, which hampers a wide application in food processing. Recently studies on the production of transglutaminase by microorganisms have been started. The enzyme obtained from microbial fermentation has been applied in the treatment of food of different origins. Food treated with microbial transglutaminase appeared to have an improved flavour, appearance and texture. In addition, this enzyme can increase shelf-life and reduce allergenicity of certain foods. This paper gives an overview of the development of microbial transglutaminase production, including fermentation and down-stream processing, as well as examples of how to use this valuable enzyme in processing foods of meat, fish and plant origin.