Caffeine is completely absorbed by the stomach and small intestine within 45 minutes of ingestion. After ingestion it is distributed throughout all tissues of the body and is eliminated by first-order kinetics.

 The half-life of caffeine — the time required for the body to eliminate one-half of the total amount of caffeine consumed at a given time — varies widely among individuals according to such factors as age, liver function, pregnancy, some concurrent medications, and the level of enzymes in the liver needed for caffeine metabolism. In healthy adults, caffeine's half-life is approximately 3-4 hours. In women taking oral contraceptives this is increased to 5-10 hours, and in pregnant women the half-life is roughly 9-11 hours.

 Caffeine can accumulate in individuals with severe liver disease when its half-life can increase to 96 hours. In infants and young children, the half-life may be longer than in adults; half-life in a newborn baby may be as long as 30 hours. Other factors such as smoking can shorten caffeine's half-life.

Caffeine is metabolized in the liver by the cytochrome P450 oxidase enzyme system (specifically, the 1A2 isozyme) into three metabolic dimethylxanthines, which each have their own effects on the body:

• Paraxanthine (84%) – Has the effect of increasing lipolysis, leading to elevated glycerol and free fatty acid levels in the blood plasma
• Theobromine (12%) – Dilates blood vessels and increases urine volume. Theobromine is also the principal alkaloid in cocoa, and therefore chocolate.
• Theophylline (4%) – Relaxes smooth muscles of the bronchi, and is used to treat asthma. The therapeutic dose of theophylline, however, is many times greater than the levels attained from caffeine metabolism.

Each of these metabolites is further metabolized and then excreted in the urine.

Mechanism of action
Caffeine acts through multiple mechanisms involving both action on receptors and channels at the cell membrane, as well as intracellular action on Calcium and cAMP pathways. By virtue of its purine structure it can act on some of the same targets as adenosine related nucleosides and nucleotides, like the cell surface P1 GPCRs for adenosine, as well as the intracellular Ryanodine receptor which is the physiological target of cADPR (cyclic ADP ribose), and cAMP-phosphodiesterase (cAMP-PDE). Although the action is agonistic in some cases, it is antagonistic in others. Physiologically, however, caffeine action is unlikely due to increased RyR opening, as it requires plasma concentration above lethal dosage. The action is most likely through adenosine receptors.

The principal mode of action of caffeine is as an antagonist of adenosine receptors in the brain. The caffeine molecule is structurally similar to adenosine, and binds to adenosine receptors on the surface of cells without activating them (an "antagonist" mechanism of action). The reduction in adenosine activity results in increased activity of the neurotransmitter dopamine, largely accounting for the stimulatory effects of caffeine. Caffeine can also increase levels of epinephrine/adrenaline, possibly via a different mechanism. Acute usage of caffeine also increases levels of serotonin, causing positive changes in mood.

The inhibition of adenosine may be relevant in its diuretic properties. Because adenosine is known to constrict preferentially the afferent arterioles of the glomerulus, its inhibition may cause vasodilation, with an increase in renal blood flow (RBF) and glomerular filtration rate (GFR). This effect, called competitive inhibition, interrupts a pathway that normally serves to regulate nerve conduction by suppressing post-synaptic potentials. The result is an increase in the levels of epinephrine and norepinephrine/noradrenaline released via the hypothalamic-pituitary-adrenal axis. Epinephrine, the natural endocrine response to a perceived threat, stimulates the sympathetic nervous system, leading to an increased heart rate, blood pressure and blood flow to muscles, a decreased blood flow to the skin and inner organs and a release of glucose by the liver.

Caffeine is also a known competitive inhibitor of the enzyme cAMP-phosphodiesterase (cAMP-PDE), which converts cyclic AMP (cAMP) in cells to its noncyclic form, allowing cAMP to build up in cells. Cyclic AMP participates in the messaging cascade produced by cells in response to stimulation by epinephrine, so by blocking its removal caffeine intensifies and prolongs the effects of epinephrine and epinephrine-like drugs such as amphetamine, methamphetamine, or methylphenidate. Increased concentrations of cAMP in parietal cells causes an increased activation of protein kinase A (PKA) which in turn increases activation of H+/K+ ATPase, resulting finally in increased gastric acid secretion by the cell.

Caffeine (and theophylline) can freely diffuse into cells and causes intracellular calcium release (independent of extracellular calcium) from the calcium stores in the Endoplasmic Reticulum (ER). This release is only partially blocked by Ryanodine receptor blockade with ryanodine, dantrolene, ruthenium red, and procaine (thus may involve ryanodine receptor and probably some additional calcium channels), but completely abolished after calcium depletion of ER by SERCA inhibitors like Thapsigargin (TG) or cyclopiazonic acid (CPA). The action of caffeine on the ryanodine receptor may depend on both cytosolic and the luminal ER concentrations of Ca2+. At low millimolar concentration of caffeine, the RyR channel open probability (Po) is significantly increased mostly due to a shortening of the lifetime of the closed state. At concentrations >5 mM, caffeine opens RyRs even at picomolar cytosolic Ca2+ and dramatically increases the open time of the channel so that the calcium release is stronger than even an action potential can generate. This mode of action of caffeine is probably due to mimicking the action of the physiologic metabolite of NAD called cADPR (cyclic ADP ribose) which has a similar potentiating action on Ryanodine receptors.

Caffeine may also directly inhibit delayed rectifier and A-type K+ currents and activate plasmalemmal Ca2+ influx in certain vertebrate and invertebrate neurons.

The metabolites of caffeine contribute to caffeine's effects. Theobromine is a vasodilator that increases the amount of oxygen and nutrient flow to the brain and muscles. Theophylline, the second of the three primary metabolites, acts as a smooth muscle relaxant that chiefly affects bronchioles and acts as a chronotrope and inotrope that increases heart rate and efficiency. The third metabolic derivative, paraxanthine, is responsible for an increase in the lipolysis process, which releases glycerol and fatty acids into the blood to be used as a source of fuel by the muscles.