The functions and applications of L-alpha-dipeptides (dipeptides) have been poorly studied compared with proteins or amino acids. Only a few dipeptides, such as aspartame (L-aspartyl-L-phenylalanine methyl ester) and L-alanyl-L-glutamine (Ala-Gln), are commercially used. This can be attributed to the lack of an efficient process for dipeptide production though various chemical or chemoenzymatic method have been reported. Recently, however, novel methods have arisen for dipeptide synthesis including a nonribosomal peptide-synthetase-based method and an L-amino acid alpha-ligase-based method, both of which enable dipeptides to be produced through fermentative processes. Since it has been revealed that some dipeptides have unique physiological functions, the progress in production methods will undoubtedly accelerate the applications of dipeptides in many fields. In this review, the functions and applications of dipeptides, mainly in commercial use, and methods for dipeptide production including already proven processes as well as newly developed ones are summarized. As aspartame and Ala-Gln are produced using different industrial processes, the manufacturing processes of these two dipeptides are compared to clarify the characteristics of each procedure.