Dynamic DNA nanotechnology belongs to a larger umbrella of DNA nanotechnology that primarily uses DNA as a nanoscopic material to build mobile structures and cascaded reaction networks powered by DNA oligonucleotides. A widely used mechanism to construct a dynamic DNA system is toehold-mediated strand displacement reactions (TMSDRs). TMSDRs are easy to engineer because of the known base-pairing rules that follow the Watson–Crick model of DNA, sequence-dependent binding rates, and energies of DNAs, whose secondary structure is predictable. Due to these attributes, TMSDRs have been used to develop enzyme-free isothermal reaction networks with remarkable applications in diagnostics, therapeutics and DNA computing. In this review, we briefly introduce the working principle of TMSDRs, in silico design considerations, and diverse input and output signals that can be processed through TMSDRs. We then summarize recent applications where TMSDRs are successfully employed in detecting clinically relevant targets such as single nucleotide polymorphisms and variants, microRNAs and whole cells and to develop programmable drug delivery vehicles and regulation therapies including transcriptional and protein regulations. We also discuss TMSDRs driven biomedical applications of DNA hydrogels and DNA computing. Finally, we discuss the challenges in each of these applications and the prospects of TMSDRs in biomedical engineering.