The effective treatment of skin wounds has long posed a significant challenge in the medical field, impacting patient comfort, quality of life, and the rate and outcome of wound healing. With continuous advancements in science and technology, novel materials have emerged, providing new possibilities for skin wound treatment. Among these, multifunctional hydrogels have shown considerable potential in promoting skin wound healing as a type of wound dressing material. This review systematically examines the progress in the application of multifunctional hydrogels in skin wound healing. Initially, the structure and composition of the skin are introduced. Subsequently, skin wounds are classified, and the wound‐healing process is discussed in detail. Traditional and modern dressings are then categorized, with a particular emphasis on the characteristics and applications of hydrogel dressings. The various functions of hydrogels in skin wound healing, including antibacterial, antioxidant, hemostatic, adhesive, stimulus‐responsive, and wound status monitoring, are reviewed. The paper concludes with a summary of the existing research gaps and provides insights into the future development directions of multifunctional hydrogels. This review aims to guide the preparation of hydrogel wound dressings and offer theoretical references for the exploration of next‐generation functional hydrogels.