Realgar is an arsenic-containing Chinese medicine known for its toxin-removing, phlegm-dispelling, and malaria-intercepting effects. It has proven to be effective in the treatment of acute promyelocytic leukemia. However, because of the harmful nature of arsenic to human health, realgar is considered a “poison” in many countries, raising concerns about the toxicity and safety of realgar and its preparations. The Shuifei process (grinding with water) of realgar plays a crucial role in ensuring its safety as a Chinese medicine. The major ingredient of realgar, As4S4, is water insoluble and poorly absorbed by the human body. Therefore, it is important to note that the toxicity and health risks of realgar to humans are overestimated by solely considering the amount of arsenic. Realgar processing is an indispensable method to ensure the quality of medicinal realgar, involving purification, powdering, detoxification, and synergism. This article not only highlights possible mechanisms through which realgar exerts pharmacological effects but also reviews the literature regarding its toxic features and potential mechanisms. Currently, realgar toxicity research primarily relies on animal experiments, and clinical data on its adverse reactions are relatively limited. The toxicity of arsenic is closely related to the form and valence of its major metabolites in the body. Animal studies have confirmed that, when realgar enters the body, the major form of arsenic metabolized is dimethylarsenic acid; therefore, it was considered that the toxicity of realgar induced by high doses might be associated with the accumulation of dimethylarsenic acid produced in the methylation pathway of inorganic arsenic. Realgar is generally less toxic when used in safe doses, but prolonged use may pose a significant risk. It is rarely used alone and is often combined with other Chinese medicines in an attempt to reduce toxicity. Scientifically and reasonably limiting the arsenic content of realgar-containing Chinese patent medicines is an effective way to improve the safety of realgar in clinical medication.