Atractylodes macrocephala Koidz. (A. macrocephala) is a perennial herb of the genus Atractylodes. The rhizome of A. macrocephala (AMR) is its medicinal part. It primarily grows in Southeast Asia and function to invigorate the spleen and qi, drying dampness and removing water. It has long been used for cancer treatment, relieving inflammation, and improving gastrointestinal function, highlighting its remarkable medicinal value. This paper focuses on recent advancements in the traditional uses, phytochemistry, and pharmacology of AMR from 2018 to the present, while exploring its therapeutic and scientific potential. In recent years, more than 120 compounds have been identified in AMR. The primary active components have been identified as sesquiterpenoids, polysaccharides and polyacetylenes. Modern pharmacological studies have demonstrated that AMR has anti-inflammatory, anti-tumor, immunity enhancement, gastrointestinal function improvement, and other pharmacological effects. It is mainly employed in the clinical treatment of tumors and gastrointestinal diseases, showing promising developmental potential. Its mechanism may be related to reducing oxidative stress, inhibiting the expression of inflammatory mediators and factors, and alleviating apoptosis through related signaling pathways. It is hoped that this review can provide a theoretical reference and scientific basis for further systematic research and extensive clinical application of AMR.