Nutraceuticals are food or food ingredients that have defined physiological effects. They do not easily fall into the legal categories of food or drug and often inhabit a grey area between the two. These products in general terms cover health promotion, “optimal nutrition” the concept of enhanced performance – both physically and mentally – and reduction of disease risk factors. In this paper the focus is mainly on legislation governing botanical-sourced nutraceuticals in the European Union (EU). Nutraceutical concept in general has been defined. Different pieces of legislation influencing botanical nutraceuticals are described. The issue of the borderline between food and drug is discussed. The regulatory status of botanical nutraceuticals as food supplement, food ingredient, functional and fortified food, novel foods and foods for particular nutritional use in the diversified, complex and ever-changing European regulatory environment is described. Botanical nutraceuticals present additional problems because of their complex nature and composition particularly with respect to the quality aspects, which in turn affect safety parameters and overall efficacy of the products. Quality issues relating to botanical sources, growth conditions, end products, their specifications and other technical criteria are highlighted. Guiding principles to be observed for conducting in vitro, in vivo studies in animals and their impact on clinical safety data are discussed. Finally, health claims, their types and criteria of substantiation in light of ongoing discussions with regard to the EU frame work of regulation on nutrition and health claims and role of process for the assessment of scientific support for claims (PASSCLAIM) initiative is discussed. The concept of grading of evidence to substantiate different claims and to establish standards, which should not be revoked or reversed by emerging science at a later stage has been considered. These issues are crucial and are being discussed at EU Parliament and Commission level during the development of the health claim regulations.