Color is the prime feature directly associated with the consumer’s attraction and choice of their food. The flavor, safety, and nutritional value of any food product are directly associated with the food color. Natural and synthetic colorants (dyes and pigments) have diversified applications in various sectors such as food, feed, pharmaceutical, textiles, cosmetics, and others. Concerning the food industry, different types of natural and synthetic colorants are available in the market. Synthetic food colorants have gained popularity as they are highly stable and cheaply available. Consumers worldwide prefer delightful foodstuffs but are more concerned about the safety of the food. After its disposal, the colloidal particles present in the synthetic colorants do not allow sunlight to penetrate aquatic bodies. This causes a foul smell and turbidity formation and gives a bad appearance. Furthermore, different studies carried out previously have presented the toxicological, carcinogenic effects, hypersensitivity reactions, and behavioral changes linked to the usage of synthetic colorants. Natural food colorings, however, have nutraceutical qualities that are valuable to human health such as curcumin extracted from turmeric and beta-carotene extracted from carrots. In addition, natural colorants have beneficial properties such as excellent antioxidant properties, antimutagenic, anti-inflammatory, antineoplastic, and antiarthritic effects. This review summarizes the sources of natural and synthetic colorants, their production rate, demand, extraction, and characterization of food colorants, their industrial applications, environmental impact, challenges in the sustainable utilization of natural colorants, and their prospects.