The global demand for sustainable and non-toxic alternatives across various industries is driving the exploration of naturally derived solutions. Hydrosols, also known as hydrolates, represent a promising yet underutilised byproduct of the extraction process of essential oils (EOs). These aqueous solutions contain a complex mixture of EO traces and water-soluble compounds and exhibit significant biological activity. To fully use these new solutions, it is necessary to understand how factors, such as distillation time and plant-to-water ratio, affect their chemical composition and biological activity. Such insights are crucial for the standardisation and quality control of hydrosols. Hydrosols have demonstrated noteworthy properties as natural antimicrobials, capable of preventing biofilm formation, and as antioxidants, mitigating oxidative stress. These characteristics position hydrosols as versatile ingredients for various applications, including biopesticides, preservatives, food additives, anti-browning agents, pharmaceutical antibiotics, cosmetic bioactives, and even anti-tumour agents in medical treatments. Understanding the underlying mechanisms of these activities is also essential for advancing their use. In this context, this review compiles and analyses the current literature on hydrosols’ chemical and biological properties, highlighting their potential applications and envisioning future research directions. These developments are consistent with a circular bio-based economy, where an industrial byproduct derived from biological sources is repurposed for new applications.