Proline accumulates in many plant species in response to environmental stress. Although much is now known about proline metabolism, some aspects of its biological functions are still unclear. Here, we discuss the compartmentalization of proline biosynthesis, accumulation and degradation in the cytosol, chloroplast and mitochondria. We also describe the role of proline in cellular homeostasis, including redox balance and energy status. Proline can act as a signaling molecule to modulate mitochondrial functions, influence cell proliferation or cell death and trigger specific gene expression, which can be essential for plant recovery from stress. Although the regulation and function of proline accumulation are not yet completely understood, the engineering of proline metabolism could lead to new opportunities to improve plant tolerance of environmental stresses.