Despite its well-known fragrance in cosmetics and medicine, a complete understanding of the phytochemical properties within by-products generated during commercial extraction of Damask rose remains elusive. Cultivated in Thailand for their essential oil, Damask rose varieties, including Mon Dang Prasert, Mon Klai Kangwon, and Bishop’s Castle, share phenylethyl alcohol (57.62–61.11%) as the dominant component, which is responsible for their characteristic floral, sweet, rosy, and bready aroma. Through a circular hydro-distillation process, three different by-product fractions, including distilled water (D), hydrosol (H), and rose dreg (R), were recovered. Subsequently, we assessed their pharmaceutical potential, including the antioxidant, antimicrobial, anti-inflammatory, and anti-melanogenesis properties of these residual substances. The H fraction displayed the highest total phenolics (10.56 mgGAE/g) and flavonoids (6.93 mgCE/g) and significant antioxidant activity (IC50, 0.67–0.97 µg/mL). While the H fraction inhibited melanin formation at 50 μg/mL, the R fraction of MK (100 μg/mL) surprisingly promoted melanin production in B16-F10 cells. Nevertheless, the antimicrobial assay against Staphylococcus aureus, Cutibacterium acnes, Staphylococcus epidermidis, Pseudomonas aeruginosa, Escherichia coli, and Candida albicans revealed no antimicrobial activity in any fraction. Murine macrophage stimulation (J774A.1) with lipopolysaccharide revealed no anti-inflammatory effects from the by-products, as measured by IL-1β production. In summary, the H fraction exhibited the highest level of phenolic and flavonoid contents, as well as antioxidant and anti-melanogenesis activities. Therefore, this by-product is a desirable choice for the development of value-added products such as functional food, cosmetics, and pharmaceutical products.