Self-assembly is a growth mechanism in nature to apply local interactions forming a minimum energy structure. Currently, self-assembled materials are considered for biomedical applications due to their pleasant features, including scalability, versatility, simplicity, and inexpensiveness. Self-assembled peptides can be applied to design and fabricate different structures, such as micelles, hydrogels, and vesicles, by diverse physical interactions between specific building blocks. Among them, bioactivity, biocompatibility, and biodegradability of peptide hydrogels have introduced them as versatile platforms in biomedical applications, such as drug delivery, tissue engineering, biosensing, and treating different diseases. Moreover, peptides are capable of mimicking the microenvironment of natural tissues and responding to internal and external stimuli for triggered drug release. In the current review, the unique characteristics of peptide hydrogels and recent advances in their design, fabrication, as well as chemical, physical, and biological properties are presented. Additionally, recent developments of these biomaterials are discussed with a particular focus on their biomedical applications in targeted drug delivery and gene delivery, stem cell therapy, cancer therapy and immune regulation, bioimaging, and regenerative medicine.