In response to the growing consumer demand for natural ingredients and simplified formulations, the cosmetic industry has seen a surge in the development and application of multifunctional ingredients. These versatile components, capable of serving multiple roles, effectively streamline the ingredient list of final cosmetic products, aligning with the current market trends. This review provides an overview of the advancements made and limits encountered in the field of multifunctional cosmetic ingredients over recent years (from 1998 to present time). The pursuit of sourcing these multipurpose ingredients has become a significant focus, with a clear shift towards natural and bio-based products, while answering the requests of consumers for eco-friendly options. By prioritizing sustainable and ethics, researchers not only adhere to regulatory standards but also pioneers innovations that set new benchmarks for quality and responsibility. The review also delves into formulation strategies for multifunctional ingredients, a critical aspect of their development process. It discusses the various approaches adopted by researchers to effectively incorporate these ingredients into cosmetic products, ensuring their safety and stability. Lastly, the review addresses the regulatory landscape surrounding cosmetic ingredients. It underscores the importance of adhering to the regulations set forth by governing bodies, ensuring the safety and efficacy, and highlights the lack of dispositions for these innovative multifunctional ingredients. In conclusion, this review offers a comprehensive insight into the multifunctional cosmetic ingredients, from their sourcing and formulation to their application and regulation, providing a valuable resource for researchers and industry professionals alike.