Smart Environment provides a concept of the combination of Internet with sensors, smart objects, and radio frequency identification. The term Smart Environment is the interconnecting or internetworking of objects that contains sensors software’s, and actuators. It enables devices to gather and transfer information over a network. Things in the Smart Environment have the ability to send and receive information to a network barring the intervention of humans and it contains physical objects that have a particular identifier with an embedded system. This new technology Internet of Things and various elements and technologies to implement Internet of Things are introduced. In this paper various applications and research challenges associated to Smart Environment are reviewed.