Chamomile has a long history of traditional medicinal uses. The two commonly used varieties with therapeutic applications are German chamomile known as Matricaria chamomilla L. and Roman chamomile or Chamaemelum nobile L. The plant contains many components, namely, flavonoids, terpenoids, and coumarins, which are responsible for its medicinal properties. The review discusses recent developments that help in establishing its role as a therapeutic agent in various areas as an anti-inflammatory, antioxidant, analgesic, antimicrobial, hepatoprotective, anti-allergic, anticancer, and anti-hypertensive agent. Not much is known about its role in the treatment of CNS disorders and metabolic syndromes, which are also discussed. The chemical components responsible for the therapeutic activity and the respective mechanism of action are also elaborated.