A method and system for generating and processing test cases for effective black box testing of software applications is provided. Test cases are automatically generated based on parameters that are identified from automated manual test cases associated with business models. The generated automated test cases cover one or more paths in the business models. Further, the automated test cases are optimized by determining minimal path covered by the automated test cases in the business models. The optimization is performed based on analysis of the one or more paths covered by the automated test cases in the business models. Furthermore, code coverage data of the optimized test cases are obtained by execution of the optimized test cases. Finally, based on the code coverage data and predetermined conditions, the optimized test cases are analyzed for at least prioritization and further optimization of the optimized test cases for effective black box testing.