In the last years the use of biodegradable fluids as liquid insulation for distribution and power transformers is becoming more common. The main biodegradable fluids are the natural and synthetic esters, although biodegradable hydrocarbons have been recently proposed as well. Biodegradable fluids have a much lower environmental impact than mineral oil, limiting the risk of soil contamination in case of leaks what makes them a suitable solution for some applications, as off-shore transformers or railway transformers. Additionally, these fluids have higher flash point than conventional mineral oils what reduces dramatically the risk of fire and collateral damage derived from explosion and fire. Despite of these advantageous factors, there are still some aspects that hinders the spread of their use, such as the difference on thermal properties, the lack of accepted maintenance procedures and the price. This paper presents the current situation of biodegradable insulating fluids, analyzing some of their properties and discussing the aspects that are still to be investigated to make them a real alternative to petroleum-based fluids.