Ability to non-invasively map the hemodynamic changes occurring focally in areas of brain involved in various motor, sensory and cognitive functions by functional magnetic resonance imaging (fMRI) has revolutionized research in neuroscience in the last two decades. This technique has already gained clinical use especially in pre-surgical evaluation of epilepsy and neurosurgical planning of resection of mass lesions adjacent to eloquent cortex. In this review we attempt to illustrate basic principles and techniques of fMRI, its applications, practical points to consider while performing and evaluating clinical fMRI and its limitations.