The escalating prevalence of wounds, particularly chronic wounds, poses significant challenges in terms of treatment management and has led to an increase in healthcare expenditure. Hydrogel-based dressings play a crucial role in wound management due to their unique properties. However, there remains a lack of comprehensive reviews on the use of hydrogel-based dressings for wound healing. This review commences with an overview of the process and characteristics of wound healing. Furthermore, we summarize the various functions of hydrogel-based dressings in promoting wound healing, including adhesive property, antibacterial efficacy, hemostasis, angiogenesis promotion, anti-oxidation, anti-inflammatory effect, self-healing, and conductivity. We further discuss the challenges encountered during the healing of different types of wounds, particularly diabetic wounds, and outline the latest advancements in the application of hydrogel-based dressings in the management of different types of wounds. In addition, we conclude and provide an outlook on the application of hydrogel-based dressings in wound healing, with the aim of further enhancing their ability to promote wound healing. This review provides an overview of the functionalities of hydrogel-based dressings and their role in promoting wound healing.