Fish oil is the lipid fraction extracted from fish and fish by-products. Currently, the production of fish oil is becoming more demanding as there is a sizeable and growing world market demand for high quality fish oils. The most important constituents of fish oils are the omega-3 fatty acids such as eicosapentaenoic acid (EPA) and docosahexaenoic acid (DHA). These fatty acids are precursors of eicosanoids that helps to alleviate inflammation in the body and also have other health benefits. Lipid oxidation products are known to be health hazards because they are associated with aging, membrane damage, heart disease and cancer. However, fortification of foods with these nutraceuticals is confined because of extreme sensitivity of PUFA to oxidation and consequent formation of toxic hydroperoxides during the manufacture and storage. This article reviews the microencapsulation, very useful technology, of PUFA within microcarriers to retard the oxidation by minimizing the access of undesirable factors. Various techniques are being employed to form microcapsules, such as extrusion coating, fluidized-bed coating, spray drying, liposome entrapment, coacervation, inclusion complexation, centrifugal extrusion, and rotational suspension separation. Dried microencapsulated fish oil (DMFO) exists in powder form, which can easily be applied to instant powder products. There are many food products in which DMFO can easily and safely be incorporated like bread, biscuits, cakes, diet powder, fruit bars, milk powder etc.