Gamma-aminobutyric acid (GABA) is widely distributed in nature and considered a potent bioactive compound with numerous and important physiological functions, such as anti-hypertensive and antidepressant activities. There is an ever-growing demand for GABA production in recent years. Lactic acid bacteria (LAB) are one of the most important GABA producers because of their food-grade nature and potential of producing GABA-rich functional foods directly. In this paper, the GABA-producing LAB species, the biosynthesis pathway of GABA by LAB, and the research progress of glutamate decarboxylase (GAD), the key enzyme of GABA biosynthesis, were reviewed. Furthermore, GABA production enhancement strategies are reviewed, from optimization of culture conditions and genetic engineering to physiology-oriented engineering approaches and co-culture methods. The advances in both the molecular mechanisms of GABA biosynthesis and the technologies of synthetic biology and genetic engineering will promote GABA production of LAB to meet people’s demand for GABA. The aim of the review is to provide an insight of microbial engineering for improved production of GABA by LAB in the future.