Nutraceutical (also called nutraceutic) is the amalgamation of the words nutrition and pharmaceutical. It was coined by Stephen L. DeFelice in the late eighties – he is the founder and currently the chair of the Foundation of Innovation medicine. It is usually used interchangeably with the term functional food, but it is actually part of a bigger functional food sector. Functional food is similar to conventional foods in terms of appearance. It is part of a usual diet and has been proven to have physiological benefits as well as lowering the risk of chronic diseases. Nutraceutics on the other hand are products which have come from foods but are sold in the market as pills, potions, powders, capsules and other forms not considered as food; and provide the same benefits as those of a functional food's.

The term nutraceutic is used to refer to products that include diet supplements, isolated nutrients, and herbal products, as well as certain types of diets and processed products such as beverages, cereals and soups. Up until the eighties, the food industry in the country was primarily based on "common sense" nutrition and home remedies. In the early eighties, scientists and nutritionists started studying the potential benefits of consuming nutrients such as calcium and fiber. They also began to show the resulting benefits in clinical studies. They have proven that nutrients have real medicinal value. This was how the study of nutraceuticals started.

The term nutraceutical has become widely used because it sounds fancy, making a person seem like he or she knows what he/she is talking about. Simply put, the term describes foods or food ingredients that work like a drug, and (as mentioned above) come in the form of a pill. Nutraceutics are treated according to the jurisdiction they belong to. In the country, the term doesn't mean anything in US law. Such a product is regulated as a food, food component, diet supplement or drug -- relative to the product's ingredients and claims. In Canada, it is marketed as a drug or food, and there's no legal distinction between the terms "nutraceutical" and "functional food". In other parts of the world, there are several quality issues that need to be addressed right away. Products coming from the international market may claim to contain organic ingredients; however, issues in regulation (or lack thereof) may compromise their effectiveness and safety.