The largest organ in the human body, the skin, is constantly exposed to various exogenous and endogenous trigger events that impact body homeostasis. Exosomes have recently gained attention for their promising role in human disorders via modulating various transduction pathways. Exosomes, a category of extracellular vesicles, play a vital role in intercellular communication and are composed of diversified biomolecules such as proteins, lipids and nucleic acid. They are an alternative to synthetic nanoparticles as they obviate the side effects. Enhancing their effectiveness and therapeutic potential involves developing large-scale production, isolation, and drug-loading strategies. They are exploited for their potential usage in various dermatological conditions like vitiligo, psoriasis, systemic lupus erythematosus, atopic dermatitis, pigment regulation, and hair growth and to encourage tissue regeneration in skin wounds. Mesenchymal stromal cells (MSCs) and their exosome have emerged as a revolutionary tool for tissue engineering and regenerative medicine. In this review, the need for exosomes in skin therapy, along with the current challenges, have been discussed. In addition, the functional role of exosomes in skin regeneration and immunomodulator therapy are overviewed.