This review summarizes the potential use of citrus peels in the food industry. The present work is an overview of different compounds extracted from various species of citrus peel and the functional properties of different compounds, along with their potential applications as valuable ingredients in food-based products. Citrus peel is a valuable natural source of diverse bioactive compounds, including polyphenols, pectins, proteins, pigments, dietary fibers, and essential oils. These bioactive compounds exhibit many biological activities, including antioxidant, antimicrobial, anticancer, anti-inflammatory, and antidiabetic activities. Thus, citrus peel can be considered as a promising source of functional foods. It can also be utilized as a food-coloring, flavoring, and thickening agent. Thus, waste generated in the citrus processing industry in the form of citrus peel exhibits potential economic benefits by reentering the food processing line as a food additive while providing sustainable and innovative solutions to food waste utilization.