Cyclic dipeptides (CDPs) are the simplest form of cyclic peptides with a wide range of applications from therapeutics to biomaterials. CDP is a versatile molecular platform endowed with unique properties such as conformational rigidity, intermolecular interactions, structural diversification through chemical synthesis, bioavailability and biocompatibility. A variety of natural products with the CDP core exhibit anticancer, antifungal, antibacterial, and antiviral activities. The inherent bioactivities have inspired the development of synthetic analogues as drug candidates and drug delivery systems. CDP plays a crucial role as conformation and molecular assembly directing core in the design of molecular receptors, peptidomimetics and fabrication of functional material architectures. In recent years, CDP has rapidly become a privileged scaffold for the design of advanced drug candidates, drug delivery agents, bioimaging, and biomaterials to mitigate numerous disease conditions. This review describes the structural diversification and multifarious biomedical applications of the CDP scaffold, discusses challenges, and provides future directions for the emerging field.