Liquid‐liquid phase separation (LLPS) refers to a spontaneous separation behavior of biomacromolecules under specific physiological conditions, playing a crucial role in regulating various biological processes. Recent advances in synthetic peptides have greatly improved our understanding of peptide‐based coacervate droplets and expanded their applications in biomedicine. Numerous peptide sequences have been reported that undergo phase separation, enabling the concentration and sequestration of different guest molecules for purposes such as drug delivery, catalytic performance, and bioanalytical techniques. Particularly, some of these peptides offer significant advantages in controlled drug release, efficient cell transfection, accelerated reaction kinetics, and selective biomarker detection. This review provides an overview of recent developments in peptide‐based LLPS, exploring various strategies for designing peptide sequences and their biomedical applications. It also addresses the challenges and future directions for LLPS peptide vehicles as promising biomaterials.