Rare earth (RE) elements are excellent modifiers for non-metallic inclusions that inevitably appear in steel and affect steel properties. This paper reviews the research status of inclusions modification by RE elements and the changes it cause on steel properties. First, the inclusion changes caused by RE modification are described. Generally, after adding pure RE, the main evolution of inclusions occurs as M → M + RE–Al–O → RE–Al–O + RE₂O₂S → RE₂O₂S + RE–S/RE₂O₂S + RE–O with an increase in the RE content (M represents the inclusions before RE addition). The type of final inclusion obtained after RE modification is related to the relative contents of S and O in the steel. Moreover, fine, regular, and uniformly distributed inclusions can be obtained with appropriate RE addition. However, the effectiveness of inclusions modification by adding both RE and non-RE elements is closely related to the order of their addition. Second, the applications and advantages of thermodynamic calculations in the study of RE-modified inclusions are introduced. Third, the changes in the corrosion resistance, impact properties, and other properties of steel caused by the modification of inclusions by RE are reviewed. Finally, the perspectives and trends of inclusions modified by RE elements in the steel industry are presented.