Coumarins, also referred as benzopyran-2-ones, and their corresponding nitrogen counterpart, 1-azacoumarins also referred to as carbostyrils, are a family of nature-occurring lactones and lactams respectively. The plant extracts containing coumarin-related heterocycles, which were employed as herbal remedies in early days, have now been extensively studied for their biological activities. These investigations have revealed their potentials as versatile biodynamic agents. For example, coumarins with phenolic hydroxyl groups have the ability to scavenge reactive oxygen species and thus prevent the formation of 5-HETE and HHT in the arachidonic pathway of inflammation suppression. Recent in vivo studies have revealed the role of coumarins in hepatotoxicity and also in depletion of cytochrome P450. Similarly 1-azacoumarins which is part of quinoline alkaloids, are known for their diverse biological activity and recently, a 6-functionalized 1-azacoumarins are undergoing human clinical trials as an orally active anti-tumor drug in view of its farnesyl protein-inhibiting activity in the nanomolar range. Furthermore, several synthetic coumarins with a variety of pharmacophoric groups at C-3, C-4 and C-7 positions have been intensively screened for anti-microbial, anti-HIV, anti-cancer, lipid-lowering, anti-oxidant, and anti-coagulation activities. Specifically, coumarin-3-sulfonamides and carboxamides were reported to exhibit selective cytotoxicity against mammalian cancer cell lines. The C4-substituted aryloxymethyl, arylaminomethyl, and dichloroacetamidomethyl coumarins, along with the corresponding 1-azacoumarins, have been demonstrated to be potential anti-microbial and anti-inflammatory agents. To expand the structural diversity of synthetic courmarins for biological functions, attempts have also been made to attach a chloramphenicol side chain at C-3 position of courmarin. In addition, the bi- and tri-heterocyclic coumrins and 1-azacoumarins with benzofuran, furan and thiazole ring systems along with biocompatible fragments like vanillin have shown remarkable potency as anti-inflammatory agents in animal models. Photobiological studies on pyridine-fused polycyclic coumarins have highlighted their potential as thymine dimer photosensitisers and the structurally related compounds of both coumarin and carbostyrils have also been found to act via the DNA gyrase pathway in their anti-bacterial activity. Apart from the above works, the present review also addresses the potential roles of coumarins and carbostyrils as protease inhibitors, or fluorescent probes in mechanistic investigation of biochemical pathways, and their application for QSAR in theoretical studies. Though 1-Azacoumarins have received less attention as compared to coumarins in the literature, an attempt has been made to compare both the systems at various stages, so that it can spark new thoughts on synthetic methodologies, reactivity pattern and biological activities.