Ipomoea batatas (L.) Lam is a dicotyledonous plant originally from tropical regions, with China and Spain acting as the main producers from outside and within the EU, respectively. The root, including only flesh, is the edible part, and the peel, leaves, stems, or shoots are considered by-products, which are generated due to being discarded in the field and during processing. Therefore, this study aimed to perform a comprehensive review of the nutritional value, phytochemical composition, and health-promoting activities of purple-fleshed sweet potato and its by-products, which lead to its potential applications in bakery products for the development of functional foods. The methodology is applied to the selected topic and is used to conduct the search, review abstracts and full texts, and discuss the results using different general databases. The studies suggested that purple-fleshed sweet potato parts are characterized by a high content of essential minerals and bioactive compounds, including anthocyanins belonging to the cyanidin or the peonidin type. The flesh and leaves are also high in phenolic compounds and carotenoids such as lutein and β-carotene. The high content of phenolic compounds and anthocyanins provides the purple-fleshed sweet potato with high antioxidant and anti-inflammatory power due to the modulation effect of the transcription factor Nrf2 and NF-kB translocation, which may lead to protection against hepatic and neurological disorders, among others. Furthermore, purple-fleshed sweet potato and its by-products can play a dual role in food applications due to its attractive color and wide range of biological activities which enhance its nutritional profile. As a result, it is essential to harness the potential of the purple-fleshed sweet potato and its by-products that are generated during its processing through an appropriate agro-industrial valorization system.