The use of essential oils (EOs) in the perfumery, agriculture, food industry and cosmetics is quite common owing to their aromatic properties. Tea tree oil is an EO with immense potential for the treatment of dermatological disorders due to its antimicrobial properties against broad spectrum of micro-organisms. It has minimal tendency to develop resistance. It is obtained from the leaves of Melaleuca alternifolia, an Australian species, by steam distillation. It is a mixture of components like monoterpenes, sesquiterpenes and their alcohols, contributing to various (analgesic, antiviral, antibacterial, antifungal, antiprotozoal, anti-inflammatory, antioxidant and anticancer) activities. Tea tree oil is reported to overcome resistance development by bacterial species towards conventional drugs. However, its hydrophobic nature, volatility and sensitivity to light, air and temperature, pose challenges to formulation scientists for its effective delivery. Tea Tree oil is reported as a safe, natural and effective agent. Since, specific knowledge on the chemical composition and properties of oil is fundamental for its adequate use, the present review compiles and discusses the hitherto scattered data on activities, tolerability, safety, toxicity and stability concern of tea tree oil. It also sheds light on various reported drug delivery systems and applications of this EO.