This chapter provides comprehensive information about the nature of residues/by-products, pretreatment methods and extraction of bioactive compounds for futuristic applications in the food and pharmaceutical industry. It describes the processes by which agricultural waste can be turned to wealth. The recovery of bioactive compounds from such wastes for development of functional/health foods is an efficient way to reuse waste. The agro-industrial residues have alternative uses or markets, though in developing countries they are directly used as fuel along with animal waste and forest litter. They are used as solid substrates in Solid State Fermentation (SSF) processes for the production of different bioactive phenolic compounds. Bioactive compounds are extra nutritional constituents that occur naturally in small quantities in plant and food products. The extracted bioactive chemicals must be identified for better understanding of their chemistry and biological activity before being taken forward for the development of functional foods, of which numerous products have already made it to the retail shelves.