Among the most important agro‐industrial activities in the Mediterranean basin, olive oil production has a high impact on the economy of many Mediterranean countries. However, olive oil extraction generates huge quantities of byproducts, including leaves, pomace residues, stones and wastewater, which have severe environmental impacts mainly because of their phytotoxicity and great organic content. Olive oil byproducts are regarded as inexpensive and abundant raw materials rich in bioactive compounds with high and varied health‐related activities. Several phenolic compounds and terpenoids were recovered from olive byproducts using different conventional and advanced extraction methods due to their potential to be used in food, packaging, pharmaceutical, and cosmetic industries. Recently, the use of olive byproducts and their functional compounds to enhance the functional properties of packaging systems was investigated as a sustainable strategy for food preservation, fostering the sustainability of the olive‐oil chain, and promoting circular economy. In this framework, the main goals of this review are to summarize the main bioactive compounds in olive byproducts, to review the main advancements in their extraction, purification, and characterization, and finally to discuss their applications in food packaging systems as well as safety‐related aspects.