GABA is a principal inhibitory neurotransmitter with systemic regulatory roles. This review synthesizes the health-promoting functions of GABA and the molecular mechanisms of its production in LAB. GABA regulates neuronal excitability via GABA receptors, suppresses inflammation by inhibiting the TLR4/NF-κB pathway, and modulates the gut-brain axis through microbiota remodeling. LAB synthesize GABA primarily via the glutamic acid decarboxylase (GAD) system, with an alternative GABA-T-mediated non-GAD pathway that requires further validation, a process tightly coupled to acid resistance. Optimization strategies include genetic engineering, fermentation control, physical stimulation, and synthetic co-culture. These strains are widely applied in dairy, plant-based beverages, and meat, enhancing flavor while sleep-improving, and microbiota-modulating benefits. However, significant challenges persist, including incomplete substrate conversion causing off-flavors, poor GABA stability in food, and genetic instability during scale-up. This work uniquely integrates non-neuronal GABA functions, metabolic diversity beyond the canonical GAD pathway, and practical challenges of GABA incorporation into food matrices.