Polymeric hydrogels have drawn considerable attention as a biomedical material for their unique mechanical and chemical properties, which are very similar to natural tissues. Among the conventional hydrogel materials, self-healing hydrogels (SHH) are showing their promise in biomedical applications in tissue engineering, wound healing, and drug delivery. Additionally, their responses can be controlled via external stimuli (e.g., pH, temperature, pressure, or radiation). Identifying a suitable combination of viscous and elastic materials, lipophilicity and biocompatibility are crucial challenges in the development of SHH. Furthermore, the trade-off relation between the healing performance and the mechanical toughness also limits their real-time applications. Additionally, short-term and long-term effects of many SHH in the in vivo model are yet to be reported. This review will discuss the mechanism of various SHH, their recent advancements, and their challenges in tissue engineering, wound healing, and drug delivery.