Artemisia vestita Wall. ex Besser, a traditional medicinal plant with healing properties, is receiving significant attention as a potential therapeutic agent for wound healing. In this study, eight Artemisia vestita leaf extract hydrogel formulations (F1–F8) were carefully designed and studied. The hydrogel formulations contained A. vestita leaf extract, tragacanth gum, humectants, preservatives, pH stabilizers, and Milli-Q water. A preformulation study was conducted to ensure safety and efficacy. Moreover, various experiments assessed the potential application and characteristics of A. vestita leaf extract hydrogel (ALEH). Drug release and swelling studies were conducted at different pH levels and temperatures. The best drug release model was identified based on the regression coefficient (R2). Antimicrobial efficacy was assessed using the agar well diffusion method, and wound healing in HaCat cells was assessed using the scratch assay. ALEH exhibited non-Fickian diffusion, with higher drug release noted at pH 6.8 than at pH 4.5, indicating pH-responsive behavior. It exhibited significant antimicrobial activity against various strains and achieved 95% wound closure after 24 h in vitro, indicating strong wound healing properties. It also had a long shelf life; therefore, it could have pharmaceutical and medical applications. Our study is the first to report the potential applications of ALEH in skincare and wound management.