The past few decades have witnessed substantial progress in biomedical materials for addressing health concerns and improving disease therapeutic and diagnostic efficacy. Conventional biomedical materials are typically created through an ex vivo approach and are usually utilized under physiological environments via transfer from preparative media. This transfer potentially gives rise to challenges for the efficient preservation of the bioactivity and implementation of theranostic goals on site. To overcome these issues, the in situ synthesis of biomedical materials on site has attracted great attention in the past few years. Peptides, which exhibit remarkable biocompability and reliable noncovalent interactions, can be tailored via tunable assembly to precisely create biomedical materials. In this review, we summarize the progress in the self-assembly of peptides in living cells for disease diagnosis and therapy. After a brief introduction to the basic design principles of peptide assembly systems in living cells, the applications of peptide assemblies for bioimaging and disease treatment are highlighted. The challenges in the field of peptide self-assembly in living cells and the prospects for novel peptide assembly systems towards next-generation biomaterials are also discussed, which will hopefully help elucidate the great potential of peptide assembly in living cells for future healthcare applications.