In recent years much attention has been devoted to the occurrence of caffeine in natural waters. It has been established that caffeine is now present in a wide variety of environments, including wastewater treatment plant (WWTP) effluents, groundwater and remote mountain lakes. However, it is less clear what the practical significance of caffeine occurrence may be because recent research has only begun to evaluate the consequences of increasing caffeine concentrations for aquatic biota. The objectives of this paper are (1) to gain a qualitative understanding of the routes through which caffeine enters the environment and the mechanisms through which it is degraded, (2) to obtain quantitative data on which to base a mass balance of caffeine in wastewater treatment plant effluent, and (3) interpret environmental occurrence levels of caffeine in the context of toxicity threshold values determined for aquatic biota. To accomplish these objectives a literature review and mass balance were performed. This paper shows that caffeine concentrations are typically in the ng/L range in many freshwater environments. In certain areas levels appear to be sufficiently high to approach threshold toxicity values for aquatic biota. Primary locations of concern in urban areas are discharge points of treated wastewater. Although caffeine presents no large scale threat now, further research is needed on the occurrence of caffeine in natural waters and its chronic toxicity to aquatic organisms.