Diabetic foot ulcer (DFU) is a major complication of diabetes and is associated with a high risk of lower limb amputation and mortality. During their lifetime, 19%–34% of patients with diabetes can develop DFU. It is estimated that 61% of DFU become infected and 15% of those with DFU require amputation. Furthermore, developing a DFU increases the risk of mortality by 50%–68% at 5 years, higher than some cancers. Current standard management of DFU includes surgical debridement, the use of topical dressings and wound decompression, vascular assessment, and glycemic control. Among these methods, local treatment with dressings builds a protective physical barrier, maintains a moist environment, and drains the exudate from DFU wounds. This review summarizes the development, pathophysiology, and healing mechanisms of DFU. The latest research progress and the main application of dressings in laboratory and clinical stage are also summarized. The dressings discussed in this review include traditional dressings (gauze, oil yarn, traditional Chinese medicine, and others), basic dressings (hydrogel, hydrocolloid, sponge, foam, film agents, and others), bacteriostatic dressings, composite dressings (collagen, nanomaterials, chitosan dressings, and others), bioactive dressings (scaffold dressings with stem cells, decellularized wound matrix, autologous platelet enrichment plasma, and others), and dressings that use modern technology (3D bioprinting, photothermal effects, bioelectric dressings, microneedle dressings, smart bandages, orthopedic prosthetics and regenerative medicine). The dressing management challenges and limitations are also summarized. The purpose of this review is to help readers understand the pathogenesis and healing mechanism of DFU, help physicians select dressings correctly, provide an updated overview of the potential of biomaterials and devices and their application in DFU management, and provide ideas for further exploration and development of dressings. Proper use of dressings can promote DFU healing, reduce the cost of treating DFU, and reduce patient pain.