Cellulose-derived hydrogels have emerged as game-changing materials in biomedical research, offering an exceptional combination of water absorption capacity, mechanical resilience, and innate biocompatibility. This review explores the intricate mechanisms that drive their swelling behaviour, unravelling how molecular interactions and network architectures work synergistically to enable efficient water retention and adaptability. Their mechanical properties are explored in depth, with a focus on innovative chemical modifications and cross-linking techniques that enhance strength, elasticity, and functional versatility. The versatility of cellulose-based hydrogels shines in applications such as wound healing, precision drug delivery, and tissue engineering, where their biodegradability, biocompatibility, and adaptability meet the demands of cutting-edge healthcare solutions. By weaving together recent breakthroughs in their development and application, this review highlights their transformative potential to redefine regenerative medicine and other biomedical fields. Ultimately, it emphasizes the urgent need for continued research to unlock the untapped capabilities of these extraordinary biomaterials, paving the way for new frontiers in healthcare innovation.