Cancer remains a concern after years of research in this field. Conventional therapies such as chemotherapy, radiation, and surgery are available for cancer treatment, but they are characterized by various side effects. There are several immunological challenges that make it difficult for the immune system and conventional therapies to treat cancer. Some of these challenges include heterogeneity, resistance to medicines, and cancer relapse. Even advanced treatments like immune checkpoint inhibitors (ICIs), which revolutionized cancer treatment, have associated toxicity and resistance further necessitate the exploration of alternative therapies. Anticancer peptides (ACPs) offer promising potential as cancer-fighting agents and address challenges such as treatment resistance, tumor heterogeneity, and metastasis. Although these peptides exist as components of the defense system in various plants, animals, fungi, etc., but can also be created synthetically and used as a new treatment measure. These peptides possess properties that make them appealing for cancer therapy, such as apoptosis induction, inhibition of angiogenesis, and cell membrane breakdown with low toxicity. Their capacity to specifically target cancer cells selectively holds promise for enhancing treatment environments as well as improving patients’ quality of life. This review provides detailed insights into the different prospects of ACPs, including their characterization, use as immunomodulatory agents in cancer treatment, and their mechanistic details after addressing various immunological challenges in existing cancer treatment strategies. In conclusion, ACPs have promising potential as novel cancer therapeutics due to their target specificity and fewer side effects than conventional therapies.