Lutein is employed as a colorant in a diverse range of food products. Given its remarkable functional characteristics, it has also found application in health foods and pharmaceuticals. Lutein exhibits multiple health-promoting effects, including alleviating visual fatigue, exerting antioxidant properties, and facilitating the development of the brain’s nervous system. When it is utilized as a raw material for health foods, its dosage design must carefully consider both its effective and safe dosages. However, when lutein serves as a functional ingredient in health foods, there are currently no national standards available for guiding its application levels. Against this backdrop, this paper comprehensively examines and analyzes the current application status of lutein in health foods in China, the basis for its compliant use, and the latest advancements in its functional mechanisms. It provides a comprehensive review of the application guidelines and limits of lutein in eight countries and regions including China. In addition, this paper delves into recent progress in delivery systems aimed at enhancing the efficient utilization of lutein. The overarching objective is to offer valuable references and a solid foundation for the research, development, and application of lutein in health foods.