In recent years, small extracellular vesicles (sEVs) have been regarded as the next generation of novel delivery systems after lipid nanoparticles because of their advantages and huge prospects in drug delivery. Studies have shown that sEVs are abundant in milk and therefore can be a large and economical source of sEVs. Natural milk-derived small extracellular vesicles (msEVs) have important functions such as immune regulation, anti-bacterial infection, anti-oxidative, etc., and play a beneficial role in human health at multiple levels, including intestinal health, bone/muscle metabolism, and microbiota regulation. In addition, because they can pass the gastrointestinal barrier and have low immunogenicity, good biocompatibility, and stability, msEVs are considered a crucial oral drug delivery vehicle. Moreover, msEVs can be further engineered for targeted delivery to prolong the circulation time or enhance local drug concentrations. However, msEVs separation and purification, complex contents, and quality control hinder their application in drug delivery. This paper provides a comprehensive review of the biogenesis and characteristics, isolation and purification, composition, loading methods, and function of msEVs, based on which their applications in biomedical fields are further explored.