Hydrogels, known for their unique ability to retain large amounts of water, have emerged as pivotal materials in both tissue engineering and biosensing applications. This review provides an updated and comprehensive examination of cutting-edge hydrogel technologies and their multifaceted roles in these fields. Initially, the chemical composition and intrinsic properties of both natural and synthetic hydrogels are discussed, highlighting their biocompatibility and biodegradability. The manuscript then probes into innovative scaffold designs and fabrication techniques such as 3D printing, electrospinning, and self-assembly methods, emphasizing their applications in regenerating bone, cartilage, skin, and neural tissues. In the realm of biosensing, hydrogels’ responsive nature is explored through their integration into optical, electrochemical, and piezoelectric sensors. These sensors are instrumental in medical diagnostics for glucose monitoring, pathogen detection, and biomarker identification, as well as in environmental and industrial applications like pollution and food quality monitoring. Furthermore, the review explores cross-disciplinary innovations, including the use of hydrogels in wearable devices, and hybrid systems, and their potential in personalized medicine. By addressing current challenges and future directions, this review aims to underscore the transformative impact of hydrogel technologies in advancing healthcare and industrial practices, thereby providing a vital resource for researchers and practitioners in the field.