Novel nonthermal inactivation technologies have been increasingly popular over the traditional thermal food processing methods due to their capacity in maintaining microbial safety and other quality parameters. Plasma-activated water (PAW) is a cutting-edge technology developed around a decade ago, and it has attracted considerable attention as a potential washing disinfectant. This review aims to offer an overview of the fundamentals and potential applications of PAW in the agri-food sector. A detailed description of the interactions between plasma and water can help to have a better understanding of PAW, hence the physicochemical properties of PAW are discussed. Further, this review elucidates the complex inactivation mechanisms of PAW, including oxidative stress and physical effect. In particular, the influencing factors on inactivation efficacy of PAW, including processing factors, characteristics of microorganisms, and background environment of water are extensively described. Finally, the potential applications of PAW in the food industry, such as surface decontamination for various food products, including fruits and vegetables, meat and seafood, and also the treatment on quality parameters are presented. Apart from decontamination, the applications of PAW for seed germination and plant growth, as well as meat curing are also summarized. In the end, the challenges and limitations of PAW for scale-up implementation, and future research efforts are also discussed. This review demonstrates that PAW has the potential to be successfully used in the food industry.