Inonotus obliquus, also known as Chaga, is a medicinal mushroom that has been used for therapeutic purposes since the sixteenth century. Collections of folk medicine record the application of Chaga for the treatment of diseases such as gastrointestinal cancer, diabetes, bacterial infection, and liver diseases. Modern research provides scientific evidence of the therapeutic properties of I. obliquus extracts, including anti-inflammatory, antioxidant, anticancer, anti-diabetic, anti-obesity, hepatoprotective, renoprotective, anti-fatigue, antibacterial, and antiviral activities. Various bioactive compounds, including polysaccharides, triterpenoids, polyphenols, and lignin metabolites have been found to be responsible for the health-benefiting properties of I. obliquus. Furthermore, some studies have elucidated the underlying mechanisms of the mushroom’s medicinal effects, revealing the compounds’ interactions with enzymes or proteins of important pathways. Thus, this review aims to explore available information on the therapeutic potentials of Inonotus obliquus for the development of an effective naturally sourced treatment option.