Environmental DNA (eDNA) has emerged as a transformative molecular approach for biodiversity assessment and ecosystem monitoring, offering a sensitive, non-invasive, and cost-effective alternative to conventional biological surveys. Organisms continuously release genetic material into their surroundings through skin cells, mucus, feces, urine, saliva, reproductive cells, and decomposing tissues. This DNA can be recovered from environmental samples such as water, soil, sediment, snow, and air, enabling researchers to detect species without direct observation or capture. Recent advancements in polymerase chain reaction (PCR), quantitative PCR (qPCR), next-generation sequencing (NGS), metabarcoding, and bioinformatics have significantly enhanced the accuracy and efficiency of eDNA-based monitoring. The technology has found extensive applications in biodiversity assessment, aquatic and terrestrial ecosystem monitoring, conservation of endangered species, detection of invasive organisms, fisheries management, wildlife conservation, environmental impact assessment, and disease surveillance. Compared with traditional survey methods, eDNA requires less field effort, minimizes habitat disturbance, and provides rapid detection of rare, elusive, or cryptic species. Nevertheless, several challenges remain, including DNA degradation, environmental contamination, PCR inhibition, incomplete reference databases, and the need for standardized sampling protocols. Continued improvements in sequencing technologies, computational biology, and international reference databases are expected to further strengthen the reliability of eDNA analyses. This review summarizes the historical development, fundamental principles, sources, analytical workflow, major applications, advantages, and limitations of environmental DNA, highlighting its growing importance as a revolutionary tool for biodiversity conservation and sustainable ecosystem management.