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Chamomile (Matricaria recutita) is an edible flowering herb widely valued for its medicinal, aromatic, and technological attributes, making it an important raw material in contemporary food applications. This review evaluates the chemical profile, bioactivity, and functional health potential of chamomile extract based on current scientific evidence. The extract contains diverse bioactive constituents, particularly flavonoids, terpenoids, and phenolic compounds, which are responsible for its strong antioxidant, antimicrobial, and anti-inflammatory properties. Owing to these characteristics and its pleasant sensory profile, chamomile extract has been incorporated into various functional foods, especially fermented and probiotic products such as herbal beverages and chamomile-enriched yogurt. Experimental findings from in vitro and in vivo studies indicate that chamomile may suppress cancer cell growth, reduce anxiety symptoms, promote gastrointestinal health, support cardiovascular function, and modulate immune responses. Beyond its therapeutic relevance, chamomile extract also serves as a natural substitute for synthetic preservatives and additives, aligning with increasing consumer demand for clean-label and plant-based ingredients. Its multifunctional properties contribute to improved food stability, safety, and shelf life while enhancing nutritional value. In addition, chamomile imparts a characteristic floral aroma, mild taste, and appealing color, which further support consumer acceptance. Collectively, chamomile extract demonstrates substantial promise as a natural functional ingredient, nutraceutical component, and bio-preservative for the development of health-oriented and technologically advanced food products, highlighting its expanding role in human nutrition and future food innovation.