Abstract: This review summarizes progress made in research on hydrogel wound dressings in promoting scarless skin healing. Wound healing is a complex biological process that involves four stages: hemostasis, inflammation, proliferation, and remodeling. Scar formation is a common issue during this process, especially pathological scars such as hypertrophic scars and keloids, which severely affect aesthetics and function. In recent years, hydrogel dressings have become a research hotspot for promoting scarless healing due to their unique physicochemical and biological properties. Hydrogels promote wound healing and reduce scar formation through multiple mechanisms, including providing a moist environment, antimicrobial activity, anti-inflammatory effects, promoting tissue regeneration, and regulating the wound microenvironment. This article details the concept and mechanisms of scarless healing and explores the application of hydrogel dressings loaded with anti-scarring drugs, stem cells, and extracellular vesicles in scarless wound healing. Additionally, it summarizes progress in research on hydrogel dressings that regulate mechanical signals and innovative multifunctional hydrogel dressings, such as photo-responsive, organic biopolymer, and nanoparticle hydrogels. These hydrogel dressings show great potential for clinical application but still face challenges such as drug delivery efficiency, biocompatibility, and long-term safety. Future research needs to further optimize the composition and functionality of hydrogels and explore their potential applications in clinical settings.