Peptides are molecules composed of two or more amino acids linked by peptide bonds, and they play essential biological roles. In recent decades, peptides have become pivotal bioactive ingredients in pharmaceuticals and cosmetics due to their unique features. Originally developed for therapeutic purposes, peptides have gained popularity in the cosmetic field, providing solutions for anti-aging, whitening, moisturizing, and skin repair. Moreover, innovations such as artificial intelligence-assisted peptide design, efficient delivery systems, and the integration of multifunctional ingredients have significantly contributed to the industry’s rapid evolution. This review explores the historical milestones of peptides in medicine and cosmetics, delves into cutting-edge synthesis technologies, and dissects the molecular mechanisms behind their cosmetic properties. Research in medicinal peptides has promoted the development of cosmetic peptides. Despite their potential, challenges such as stability, bioavailability, and cost-effective production remain barriers to widespread adoption. Future studies should focus on enhancing peptide stability, developing synergistic formulations, and conducting large-scale clinical trials to validate long-term efficacy. With continuous innovation, peptides are poised to redefine the cosmetic industry, bridging the gap between pharmaceuticals and skincare for safer and more effective solutions.