Lime juice, peel and oil are generally considered safe to consume in food amounts. Few reported side effects, including photosensitivity, headaches, diarrhea and dental effects, have been noted in case reports and clinical studies. Lime has GRAS (generally recognized as safe) status for use in foods in the United States.

Dr. Scott Flugman, of Huntinton Hospital in New York, reports in the Archives of Dermatology [1] that a substance in lime juice, if left on the skin in the sun, can cause the skin to become discolored, as if stung by jellyfish or poison ivy with marks that can last for months. The substance, called psoralen makes the skin more sensitive to the effects of a wavelength of ultraviolet light known as UV-A. Psoralen is commonly used as treatment for skin issues such as vitiligo, psoriasis and eczema. [2]

Skin discoloration due to psoralen is common in drinkers of Mexican beers, particularly Corona, which typically served with a lime slice wedge into the top of the bottle. The drinker then shoves the lime into the bottle and holds his or her thumb over thre bottle's mouth to mix in the juice. However,  the beer's carbonation can spray lime juice and beer all over the skin. Add a sunny environment like a beach or swimming pool and UV-A rays from the sun can quickly cause blistering, rashes, and temporary discoloration.

Applicable parts of lime in skin care products include the peel, fruit, and juice. Lime pericarp,or the lime fruit. including skin and pulp,contains an essential oil (7%), whose main components are citral, limonene, β-pinene, and fenchone (up to 15%). Lime oil has also been documented to contain oxypeucedanin, a phototoxic compound. Further aromatic compounds are terpineol, bisabolene and other terpenoids. The fresh juice of acid limes averaged approximately 7.7% citric acid and 0.3% invert sugar. The peel, or rind, contains a volatile oil including the terpene limonene and citral
 

Phototoxicity can occur after you apply an essential oil topically and then add sun exposure. This happens most often with certain oils, such as bergamot, lemon, lime, orange as well as with other herbs such as angelica. For example, if you spray yourself with a solution such as a body mist containing citrus essential oil and then lie out in the sun or in a tanning bed, you will most likely get a sunburn or even deeper burns. [4]

Lime and other citrus oils are popular ingredients in summer skincare products. Distilled lime oil is often considered non-irritating, non-sensitizing and non-phototoxic to human skin, expressed or cold-pressed lime oil and lime peel may cause phototoxic skin reactions. It is important to recognize the limitations of usage, especially in products intended for use in the sunny months of summer. Alternatives such as distilled lime oil, lime peel powder of fragrance oils designed to mimic the scent of limes are widely available and help reduce the risk of skin discoloration and photosensitivity. Manufacturers using any variety of citrus essential oils should provide a warning and caution statement on the product label-per FDA guidelines-advising that sun exposure should be avoided while using the product. [5]