Walnuts are one of the world’s most important nut species and are popular for their high nutritional value, but the processing of walnuts produces numerous by-products. Among them, Diaphragma Juglandis Fructus has attracted the attention of researchers due to its complex chemical composition and diverse bioactivities. However, comprehensive reviews of extract activity and mechanistic studies, chemical composition functionality, and product types are scarce. Therefore, the aim of this review is to analyze the extracts, chemical composition, and product development of Diaphragma Juglandis Fructus. Conclusions: For extracts, the biological activities of aqueous and ethanol extracts have been studied more extensively than those of methanol extracts, but almost all of the studies have been based on crude extracts, with fewer explorations of their mechanisms. For chemical composition, the bioactivities of polyphenols and polysaccharides were more intensively studied, while other chemical constituents were at the stage of content determination. For product development, walnuts are mainly used in food and medicine, but the product range is limited. In the future, research on the bioactivity and related mechanisms of Diaphragma Juglandis Fructus can be further expanded to improve its value as a potential natural plant resource applied in multiple industries.