Lactic acid bacteria (LAB) strains secrete extracellular polysaccharide either associated with bacterial cell wall or liberated into the medium. The term exopolysaccharide (EPS) is used to describe either type of extaracellular polysaccharide. EPS plays an important role in the improvement of physical properties of fermented milks, acting as a stabilizer, viscosifier, emulsifier or gelling agent thereby providing the product with natural thickness. Besides, EPS of LAB are thought to have beneficial effects on human health such as cholesterol-lowering ability, anticanceral, immunomodulating and antitumoral activities and prebiotic effect. Consumer’s demand for natural, healthy and low-calorie food has increased interest in the dairy industries for development and manufacture of low-fat/fat-free fermented milk products. But fat removal has several undesirable effects on technological properties of fermented milks leading to inferior flavour, texture and rheological properties that consequently hamper consumer acceptability. EPS producing LAB cultures are interesting which offer a natural and usually simplest way for making low-fat/fat-free fermented milks with more acceptable flavour and sensory attributes. The present review discusses the work reported on EPS producing LAB, factors affecting EPS production by LAB, types of EPS and their properties. Literature survey on application of EPS producing LAB in dairy product manufacture has also been presented.