The therapeutic potential of medicinal plants has attracted special interest in recent years as a result of their abundant reservoirs of bioactive compounds. The purpose of this review is to discuss the value of medicinal plants in cosmeceutical applications based on their bioactive constituents and their relevance to skin health. Plant bioactive compounds such as flavonoids, phenolic acids, alkaloids, terpenoids, and tannins display a wide variety of biological activities, including antioxidant, anti-inflammatory, and antimicrobial effects. By enhancing moisture, elasticity, and barrier function of the skin, these features help overcome the typical pathology of the skin, such as oxidative stress, inflammation, hyperpigmentation, and infections caused by microorganisms. Aloe vera, Curcuma longa (turmeric), Camellia sinensis (green tea), and Centella asiatica (gotu kola) are some of the most studied plants in terms of their cosmeceutical potential. Throughout this review, we examine the mechanisms by which their bioactive compounds inhibit collagen synthesis, melanin production, and free radical production. Furthermore, the latest developments in formulation technology, namely the use of nanoencapsulation and liposomal delivery systems with enhanced stability and bioavailability of plant-derived ingredients, will be discussed. While these findings are promising, some concerns include variability in plant composition, standardization of extracts, and the potential risk of adverse effects. These concerns warrant further investigation both in terms of safety and efficacy. Currently, the regulatory environment for cosmeceuticals derived from plants is far from standardized; therefore, further harmonization of regulations or guidelines is required. Through promoting natural and environmentally friendly alternatives, this review examines the vast potential of medicinal plants as sustainable and effective sources of development in cosmeceuticals. To meet growing consumer demand, future studies should focus on clinical validation, new formulation strategies, and scaling up production.